Should We Fear Derivatives
Bibliographic Data
| ID | 4029982 |
|---|---|
| Authors | René M Stulz (0000-0003-2956-4806, Reese Professor of Banking and Monetary Economics, The Ohio State University, Columbus, Ohio, and Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts., corresponding author) |
| Year | 2004 |
| Volume | 18 |
| Issue | 3 |
| Pages | 173-192 |
| Publication date | 2004-08-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Journal of Economic Perspectives (JOURNAL) |
| Journal identifiers | ISSN: 0895-3309 • E-ISSN: 1944-7965 |
| Publisher | American Economic Association (PUBLISHER • US) |
| DOI | 10.1257/0895330042162359 |
| OpenAlex | W3121661323 |
| Language | EN |
| Citations received | 6 |
| References cited | 16 |
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
Arbitrage · Business · Derivatives market · Economics · Financial economics · Financial market · Futures contract · Banking stability, regulation, efficiency · Computer Science · Insurance and Financial Risk Management · Risk Management in Financial Firms · Finance
| Unique citing works | 6 |
|---|---|
| Citations per year | 0,29 |
| Citation span | 2005 - 2024 (20) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 6 |