SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Currencies and the Global Capital Markets
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Knighty Tin who wrote (3195)1/2/2002 9:42:00 AM
From: Hawkmoon  Read Replies (1) of 3536
 
It's not derivatives that are the problem. It's the ABUSE of derivatives, and poor risk management practices that cause the problems.

Personally, I wouldn't trust any bank that didn't use derivatives to financially hedge their assets, and to a more limited degree, enhance their returns.

Derivatives are crucial for spreading risk out so no one entity carries it all. But some folks get carried away with acquiring a lot of liabilities on instruments which are normally very predictable (LTCM), and when those predictions are defied, or there is an event induced crisis like Sept 11th, they wind up losing their heinies because of poor risk management.

But derivatives are not the problem. In fact, whether gold backed, or Fiat, bank loans outstanding are a derivative of the percentage of actual deposits on hand, and their fractional reserves. If all of those loans default, and there is no spreading of the risk, the bank collapses (and deservedly so).

Hawk
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News