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Title: Are derivatives providing a net benefit to the economy? Post by: Daniela_grefi on July 23, 2015, 04:33:56 AM it is indeed a very good question and reminds me of my days in School where we used to debate on the topic: 'Is Science a Boon or a Bane?".
This question is on very similar lines. Derivatives can indeed help an ecomony to benefit from it if used correctly. But the trend is more towards creating exotic products to generate profit out of it rather than using it to hedge against risk. As Jeffrey rightly pointed out, hedge funds are a classic example of how they use dervivatives to reap profits for an individuals. Fund of Funds is another example where Fund of Fund manager invests in multiple hedge fund portfolio to ensure he gets the profits out of all the hedge funds and if he incurs a loss it its limited to an investment made towards a particular portfolio if hedge fund. Title: Re: Are derivatives providing a net benefit to the economy? Post by: Possum577 on July 23, 2015, 08:18:58 AM I think so, but there's no controls over new investments so the public is left wading more complicated risks. And unless people really understand the risk they're taking they'll be prone to heavy losses. The market is fun, but it's the real world...the good and the bad.
Have you heard about www.motifinvesting.com? Title: Re: Are derivatives providing a net benefit to the economy? Post by: MadAlpha on July 23, 2015, 08:51:10 AM But the trend is more towards creating exotic products to generate profit out of it rather than using it to hedge against risk. As Jeffrey rightly pointed out, hedge funds are a classic example of how they use dervivatives to reap profits for an individuals. Why are you talking like profit is a bad and a negative thing? What is wrong with derivatives which generate profits for people? Title: Re: Are derivatives providing a net benefit to the economy? Post by: botany on July 24, 2015, 11:46:08 PM it is indeed a very good question and reminds me of my days in School where we used to debate on the topic: 'Is Science a Boon or a Bane?". This question is on very similar lines. Derivatives can indeed help an ecomony to benefit from it if used correctly. But the trend is more towards creating exotic products to generate profit out of it rather than using it to hedge against risk. As Jeffrey rightly pointed out, hedge funds are a classic example of how they use dervivatives to reap profits for an individuals. Fund of Funds is another example where Fund of Fund manager invests in multiple hedge fund portfolio to ensure he gets the profits out of all the hedge funds and if he incurs a loss it its limited to an investment made towards a particular portfolio if hedge fund. Speculators using derivatives are important too, because they provide liquidity to the market. You definitely need market makers. In traditional derivative markets, if you have the need to hedge an exposure, you can go to a bank and ask them to structure a derivative product. You can't do that with bitcoins. :) Title: Re: Are derivatives providing a net benefit to the economy? Post by: Deuceisgood on July 25, 2015, 06:53:46 AM Derivatives are simply a type of tool. Like a gun. Guns have very valuable and practical uses. They are used to defend a country. They are used to hunt and feed one's family. At the same time they can be used for very heinous purposes. Same with derivatives. They reduce the costs for some investment strategies. In irresponsible hands, however, they can do a lot of damage. Derivatives themselves are neither good nor bad. It is what we do with them, or how we allow them to be used, that can be viewed as 'good' or 'bad.'
Title: Re: Are derivatives providing a net benefit to the economy? Post by: Outlander on July 26, 2015, 07:26:35 AM Speculators using derivatives are important too, because they provide liquidity to the market. You definitely need market makers. In traditional derivative markets, if you have the need to hedge an exposure, you can go to a bank and ask them to structure a derivative product. You can't do that with bitcoins. :) I think there are some companies offering bitcoin derivatives trading, like https://www.cryptofacilities.com/, http://www.teraexchange.com/,796.com etcWhy are you talking like profit is a bad and a negative thing? What is wrong with derivatives which generate profits for people? The problem is that ppl are for the profit, taking the excessive risk, and borrowing reskless amount of loan! It will cause the price booming.Ppl don't know how to control the risk.So you can imagine the consequence now!Title: Re: Are derivatives providing a net benefit to the economy? Post by: Possum577 on July 26, 2015, 07:35:39 AM Derivatives are the evolution of investments.
Derivatives are great, they expand our thinking, they expand the opportunity to make money. The problem lies in the lack of regulation to keep derivatives, what are experimental investment ideas at the start, from completely destroying the common investor. Maybe the problem is in regulation. Maybe the problem is with the investment advisors selling these things to people who aren't "sophisticated" enough at investing to understand all the risks that match the reward they've been sold. If we lose derivatives we lose growth. Title: Re: Are derivatives providing a net benefit to the economy? Post by: pitham1 on July 26, 2015, 02:04:29 PM The problem is that ppl are for the profit, taking the excessive risk, and borrowing reskless amount of loan! It will cause the price booming.Ppl don't know how to control the risk.So you can imagine the consequence now! If people are borrowing recklessly, why are the lenders giving loans? The lenders will lose money and they have only themselves to blame. |