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Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (111780)	3/27/2012 11:06:42 PM
From: Bread Upon The Water	Read Replies (2) \| Respond to of 149317

Used CORRECTLY derivatives can actually lessen risk--at least that is my understanding. They act as a leveraged hedge on one's bet. They have to be made transparent on the trading exchanges though so everyone knows how much money is in play and what side of the bet it is on. This is the problem the SEC is working on. Used CORRECTLY derivatives add liquidity to markets. Part of the problem was the pricing of the derivatives INCORRECTLY by AIG which was using the formula of a Canadian Finance Graduate Student to arrive at a risk derived price. However the student's data was based on an incomplete history of market prices and therefore was flawed. Quants at AIG knew this and tried to tell their bosses, but the bosses didn't care because their derivative section was taking in big bucks. Same ole same ole. Mister Greed done us in.