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To: Defrocked who wrote (36143)	4/24/1999 10:15:00 PM
From: Bonnie Bear	Respond to of 86076

uh uh..respectfully disagree on a couple of things... nonconstant interest rates, and different dr/dt within the bond market gave us last autumn's debacle. It will undoubtedly happen again, tho not likely the same way... ..."option demand drives volatility"...well yes, we agree, my observation here was that it seems to drive stock price, rather than stock price driving option demand.. ...option trading is regulated....ROFL hohohohohehehe..option trading is an act of collusion among the brokers, they are caught from time to time and pay a token pence as pennance for their evil deeds. ...and equity derivatives are a tiny part of the derivatives universe. there's the convertibles and leaps game, the bond and currency markets as well as the indexes, and the trading of these goes on 24 hours a day 7 days a week...the size of the derivatives market has been estimated to be at least ten times the size of the global equity markets. It is a nightmare for regulators because the off-balance-sheet stuff is unregulated, and events such as LTCM may recur from time to time. The problem with derivatives is that the size and the location of bubbles can form much faster than the fed can react, that is, there can be implicit inflation in the economy rather quickly but the way the fed averages its data over several years makes it difficult for them to react until the damage is already done. check out info on the private placement of short-term convertibles on amazon and most of the other net stocks...it's a pretty interesting subject.

To: Defrocked who wrote (36143)	4/24/1999 11:29:00 PM
From: yard_man	Respond to of 86076

For standardized options and various index options that are widely traded, I'm sure your statements are accurate, but what about the derivatives that aren't widely traded? Could there be a minor bogeyman or two in there? We always see the phenomenal numbers about the total exposure of banks and everyone says that it is wrong to look at these numbers in total because all the events that would trigger such exposure can't happen simultaneously, but do we really know how far these transactions are "cascaded?"