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I think the real answer is that things don't need to be necessary to exist. Options are just another way to structure investment. They exist because someone dec

• pjlegato 11y ago
  Well, for that matter, stocks don't need to exist, either. We could go back to the medieval way of requiring all business enterprises to be fully funded by the founders personally. The problem is that greatly restricts the scope of what kinds of businesses can exist, since most interesting things for a business to do require a lot more capital than most people have or can raise. There are many examples of failed derivatives instruments -- that is, derivatives instruments that once existed and no longer exist today because of lack of interest in using them. They performed an insufficiently useful economic role, so nobody traded them. Today, for example, there is an ongoing effort to list real estate futures, but there is little marketplace interest and they will probably be delisted within the next few years. The derivatives that survived survive not from mere inertia, but because people (not some abstract "system," but real people) find them economically beneficial in some way.