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As the above commenter stated. In the classical example (and a perfect world) derivatives can act as a sort of "insurance" or guidebook of risk. But we do not l
by ItendToDisagree 13y ago
As the above commenter stated. In the classical example (and a perfect world) derivatives can act as a sort of "insurance" or guidebook of risk. But we do not live in a perfect world. Greed is a real thing (and maybe one of the reasons Capitalism works so damn well), so it rarely works exactly that way. In the end it is often just a way to treat the little guy as a sucker while insulating the bigger fish. Or at least that is how history has shown it to play out so far.
- WalterBright 13y agoWhen I was young, I got into a poker game with some local hoods, and they cleaned me out. I knew enough about the odds to know they were cheating, but not enough to know how they were doing it. I resolved not to play poker again until I understood the game much better. Ditto for derivatives. If you don't understand the game, you should invest in something else.
- judk 13y agoMy poker experience is actually closely analogous to the reality of AIG meltdown: when I lost, my buddies collected, but when I won, "we were just playing for fun, not real money".