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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (16018)	1/4/2009 9:57:48 AM
From: dybdahl	Respond to of 71403

I totally agree that your example works this way - except if the same seller has a swap that cancels out the effects. If company A wants insurance against a falling dollar and company B wants insurance against a rising dollar, an insurer can insure both at low risk, and everybody is happy. The total volume is double the size, compared to the situation where A and B would trade directly. In other words, the sum of those two derivatives doesn't contain much information on which you can make decisions. I can fully understand why people don't "understand derivatives". Correct mathematics would require much more knowledge about the conditions and details of each party, than what is currently available.