I think the most crippling derivative was the credit default swap which we have already learned about. In my opinion, it allowed firms to increase their leverage the most, and allowed third parties to make bets on things they had a no part of.
That makes perfect sense to me, and it correlates well to how I live my life and would react. If I gained any amount I would be less expressive than I would be if I lost a lesser amount. It's just the way the world works, and how greed is managed.
It seems like the more risk that these derivatives have the more reward they have the possibility of returning.
ReplyDeleteI think the most crippling derivative was the credit default swap which we have already learned about. In my opinion, it allowed firms to increase their leverage the most, and allowed third parties to make bets on things they had a no part of.
ReplyDeleteHigher risk means higher reward but we learned in my investments class that people react more to losing 100 dollars than to earning 100 dollars
ReplyDeleteI agree Shane, but if it is not their money directly that they are losing, then they really only see the possibility of gaining $100.
ReplyDeleteThat makes perfect sense to me, and it correlates well to how I live my life and would react. If I gained any amount I would be less expressive than I would be if I lost a lesser amount. It's just the way the world works, and how greed is managed.
ReplyDelete