A Quote by John Lanchester
In an ideal world, one populated by vegetarians and Esperanto speakers, derivatives would be used for one thing only: reducing levels of risk. The list of individual traders who have lost more than a billion dollars at a time betting on derivatives is not short.
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People far too often associate derivatives markets with mere speculation, but there are very legitimate businesses that need derivatives to protect themselves against risk.
The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions... Derivatives have permitted the unbundling of financial risks.
Life can be lived at a remove. You trade in futures, and then you trade in derivatives of futures. Banks make more money trading derivatives than they do trading actual commodities.
We've used derivatives for many, many years. I don't think derivatives are evil, per se, I think they are dangerous.
Do we have to regulate derivatives? Yes, we do. 'Cause when I did this in my investments, frankly, no one knew who could pay who. But derivatives have an important place in our economy.
In bypassing barriers between different classes, maturities, rating categories, debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk.
When they are employed wisely, derivatives make the world simpler because they give their buyers an ability to manage and transfer risk.
I urge you to sin. But not against these itty-bitty religions, Christianity, Judaism, Islam, Hinduism, Buddhism-or their secular derivatives, Marxism, Maoism, Freudianism and Jungianism-whic h are all derivatives of the big religion of patriarchy. Sin against the infrastructure itself!
I mean, we've always had gold bugs, but now we sort of realize that Treasure Bills might be in the same category. And we have derivatives like credit default swaps which are in this category, and we have derivatives like volatilities that are actually an asset class that we can invest in which are now - would out perform if we have another financial crisis.
From the 1990s onward, the financial sector created a vast array of instruments designed to separate investors from their money, financial derivatives of an ever-increasing level of complexity. At some point, this complexity reached a point where even the creators of the derivatives themselves didn't understand them.
Bill Gates has 90 billion dollars ... If I had 90 billion dollars, I wouldn't have it for long because I would just dream of all the crazy stuff I could do with it. This guy, 90 billion dollars. He could buy every baseball team and make them all wear dresses and still have 88 billion dollars.
If AIG had tried to unwind their derivatives books. I don't know. It would have hit every institution in the world.
The model used by Wall Street to price trillions of dollar's worth of derivatives thought of the financial world as an orderly, continuous process. But the world was not continuous; it changed discontinuously, and often by accident.
With the derivatives market larger than ever, we need way more regulation of Wall Street, not less.
There are challenges in terms of the measurement of VAR for what are known as nonlinear derivatives, where things like gamma and vega are important dimensions of the risk.
At Berkshire, I both initiate and monitor every derivatives contract on our books ... If Berkshire ever gets in trouble, it will be my fault. It will not be because of the misjudgments made by a risk committee or chief risk officer.
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