Should we fear derivatives?
By: Rene M. Stulz.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10574; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10574.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Derivative securities.; Portfolio management.
Description: "This paper discusses the extent to which derivatives pose threats to firms and to the economy.  After reviewing the derivatives markets and putting in perspective the various measures of the size of these markets, the paper shows who uses derivatives and why.  The difficulties firms face in valuing derivatives portfolios are evaluated.  Although academics pay much attention to no-arbitrage pricing results, the paper points out that there can be considerable subjectivity in the pricing of derivatives that do not have highly liquid markets.  It is shown that the known risks of derivatives portfolios can generally be measured and managed well at the firm level.  However, derivatives can create systemic risks when a market participant becomes excessively large relative to particular derivatives markets.  Overall, the benefits of derivatives outweigh the potential threats"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 1/27/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.