View Poll Results: What is your opinion on financial derivatives?

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  • All types of derivatives are dangerous & can cause serious damage to an economy

    73 62.39%
  • Certain types of derivatives are OK, but other, more complex types lead to major trouble

    40 34.19%
  • They are not dangerous & should only be the business of those involved

    0 0%
  • Other (please state)

    4 3.42%
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Thread: Your Opinion On 'Derivatives'

  1. #31
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by Redress View Post
    I associate derivatives with calculus.
    Integral and proportional too !!

    I miss my old Calclus teacher

  2. #32
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by whysoserious View Post
    You can leverage positions via derivatives:


    In this case, you can leverage mortgage-backed securities by buying credit-default swaps. There is only one mortgage-backed security, since they represent a real thing: the securities contained within. However, you can buy as many CDS as the market will sell since it is a bet on the success of the MBS.

    It's leveraging because you can buy into extremely large positions with a small amount of money (or no money).
    Investment Banks holding MBSs by LAW had to collateralIize those securities while they were in their possession ( portfolios )

    They did that via CDSs.

  3. #33
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by Fenton View Post
    Investment Banks holding MBSs by LAW had to collateralIize those securities while they were in their possession ( portfolios )

    They did that via CDSs.
    The idea that you can use a credit-default swap that bets on the success of the underlying as collateral for the underlying is beyond me. I sincerely hope that's not true. Usually people use underlying positions to collateralize derivatives, I thought - not the other way around.
    Ted Cruz is the dumbest person alive.

  4. #34
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by whysoserious View Post
    The idea that you can use a credit-default swap that bets on the success of the underlying as collateral for the underlying is beyond me. I sincerely hope that's not true. Usually people use underlying positions to collateralize derivatives, I thought - not the other way around.
    They were and are essentially insurance policies on the underlying assets. Government regulations mandated that these Securities be collateralIzed.

    Interesting enough, the only two Financial entities that were not forced to collateralIzed their securities were Fannie and Freddie. WE got stuck with their losses.

    On a side note, Credit derivatives held now by investment banks dwarf the amount of MBSs derivatives that nearly collapsed the economy back in 2008.

    I acute hike in interest rates wouldn't just bankrupt the FED but would bankrupt major Wallstreet institutions.
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  5. #35
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    Re: Your Opinion On 'Derivatives'

    Most need to be banned.

    Insuring a loan is impossible. If you loan, YOU take the risk. NOT the tax payers.

    The rest regulated. Only allow new ones after 10 years of testing.

    They are the root of all evil in 2008 total meltdown.

    But no one knows what they are.

    Read "The big short" and "Reckless endangerment" .
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  6. #36
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by KevinKohler View Post
    Derivatives "cancel" each other out...meaning, SOMEONE wins, and SOMEONE loses.


    If the loser is "too big to fail"....
    That is the case at face value. Usually there is a further dimension, however.

    Each party to the deal improves their position by the transaction. The most straight forward case is the case of a forward, wth which each side reduces their risk. One sells Dollars he knows he will receive in three months, when he ships the finished Porsche to the American dealer. The other sells Euros she knows she will get for consulting the Dutch government on software security. One of the two will certainly "loose" in the sense of having had a better exchange rate had they waited. But both are better off, because the knew from the start that they would not "loose" in the sense of not being able to pay their bills, when the job was done. The risk of receiving Euros at a set rate instead of at the better rate is not a problem for Porsche. Their risk was that the rate might fall and that they would not have the cash to pay their workers and would have to let them go.
    This actually happened to Porsche before they started hedging and they almost bancrupted.

  7. #37
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by Fenton View Post
    Integral and proportional too !!

    I miss my old Calclus teacher
    My God. Was she cute!

  8. #38
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by 274ina View Post
    Most need to be banned.

    Insuring a loan is impossible. If you loan, YOU take the risk. NOT the tax payers.

    The rest regulated. Only allow new ones after 10 years of testing.

    They are the root of all evil in 2008 total meltdown.

    But no one knows what they are.

    Read "The big short" and "Reckless endangerment" .
    The root evil, if you want to see evil was the Greenspan/Clinton bubble of which 2008 was the second crest. That US legislation caused more mortgages to be granted than would likely be paid back was a secondary incendiary. Derivatives were only a minor factor, really. Even the guarantees sold by aig and a number of moniline insurers that are a type of derivative or insurance policy were only add on to the underlying negative forces.

  9. #39
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by KevinKohler View Post
    For instance....I have a rare comic book worth 1,500 bucks. Another guy has another rare one worth the same, but it's not the same comic as mine. If we were to agree to exchange the VALUE of our comics, but not the comic itself, at a later date, that would be a derivative.
    So the other guy has a book worth $1,525. What is the "value" that is being exchanged? He gives you $1,525 while you give him $1,500?

    Why would he do that when he would lose $25?
    Quote Originally Posted by poweRob View Post
    Stats come out and always show life getting better. News makes money in making you think its not.
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  10. #40
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    Re: Your Opinion On 'Derivatives'

    Quote Originally Posted by joG View Post
    The root evil, if you want to see evil was the Greenspan/Clinton bubble of which 2008 was the second crest. That US legislation caused more mortgages to be granted than would likely be paid back was a secondary incendiary. Derivatives were only a minor factor, really. Even the guarantees sold by aig and a number of moniline insurers that are a type of derivative or insurance policy were only add on to the underlying negative forces.
    First came the derivatives, THEN corps planted people in Gov to increase the "deals", (more fake mortgages), to increase derivatives profits.
    they did not care at all about home sales, or people at all.

    Read Reckless endangerment.

    To eliminate this "deal" incentive, you must eliminate all derivatives in home sales.

    of course the real solution is this. Ban the Mortgage.

    Your Opinion On 'Derivatives'-houseboat-jpg

    No mortgage. No leeching banker. N o wall street. USA did it for 100 years, we can do it again.
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