Financial Derivatives: This is just the beginning!
A couple of articles on the increasing economic impact of financial derivatives:
Reuters: Derivatives markets may hold key to U.S. recession
Collateralised Debt Obligations (CDOs) are baskets of bonds that give investors varying levels of exposure to defaults. CDOs helped fuel the U.S. housing boom by purchasing bonds backed by sub-prime mortgages and distributing the risk.
The trouble with CDO investors . . . is that they are fickle, jumping from one type of collateral to the next on a moment’s notice.
Economist: Looking for options
Equities make more headlines, but futures and options are fast becoming the bloodiest front in the battle for global dominance among financial marketplaces.
Joshua Carter of Goldman Sachs sees “derivatisation” as one of the three main trends in the exchange business, along with consolidation and “electronification”.
Back home in India, single stock futures trading has grown at a phenomenal pace, and the commodities exchanges are no far behind either. But US-style mortage backed securities are yet to become popular.
