Quotes About Derivatives

They've been fairly positive, as firm as they could be in regards to the derivatives operations in Montreal. We didn't sense that there was a hesitation about it. But things change.

Do we have to regulate derivatives? Yes, we do. 'Cause when I did this in my investments, frankly, no one knew who could pay who. But derivatives have an important place in our economy.

These same six banks control 95 percent of all derivatives and hold more than 40 percent of all bank deposits in the United States.

The options and futures traded on exchanges are derivatives contracts.

Derivatives in and of themselves are not evil. There's nothing evil about how they're traded, how they're accounted for, and how they're financed, like any other financial instrument, if done properly.

What I think about derivatives is if every institution that owns or trades them is properly margined and marked to market, including end-users, including every institution, including sovereigns and multilateral institutions, then the system would be safe - if people were margined the way customers of investment banks are margined.

Derivatives trading should be standardized and as much as possible moved to clearinghouses.

The marginal people on the trading desks, there's no skill set. If they don't trade derivatives, I don't know what they can do. The next stop is driving a cab.

Money never seems to be interested in strengthening regulatory agencies, for example, but always in subverting them, in making them miss the danger signs in coal mines and in derivatives trading and in deep-sea oil wells.

I have a quantitative background, but really, derivatives appealed to me because they require so much creativity.

We started giving presentations at practitioner conferences in 1986, and since then all of our derivatives research has been stimulated by contact with practitioners.

My first scientific paper in 1961 reported an additivity rule for substituent-induced shifts of proton NMR signals in steroid derivatives.

We have institutions that have been allowed to become too big to fail because we had all kinds of flaws in our financial infrastructure, in the whole way over-the-counter derivatives work.

How do you explain to an innocent citizen of the free world the importance of a credit default swap on a double-A tranche of a subprime-backed collateralized debt obligation?

In early 1994 Mexico was hot. The U.S. had recently passed NAFTA—the North American Free Trade Agreement—and bankers were racing south to Mexico City. The Emerging Markets Traders Association said 1993 trading volume was $1.5 trillion, double the previous year, and Latin American derivatives were the fastest growing portion of the derivatives market. Monthly trading of Latin American derivatives had increased to a face value of $25 billion in 1993 from $3 billion in 1992.

Vincent Bailey, portfolio manager at BEA Associates, a New York money-management firm that managed $3 billion in Latin American funds, said that when Latin American derivatives are sold, "Mostly it's done for people who can't buy the actual securities

These were heady days at Morgan Stanley. No one seemed to care about how risky many of the hundreds of derivatives deals were. No one seemed to care about whether clients actually understood what they were buying, even when the trades had hidden risks. The group simply continued to pile trade on top of trade. Year by year, client by client, trade by trade, the venerable House of Morgan was building a precarious house of cards.

steeper. In a way, the forward curve simply stretches or magnifies the shape of the current yield curve. And if you don't believe what the forward curve is predicting, then derivatives allow you to bet against the forward curve.

I couldn't understand how they had lost so much money. When you bought stock in one of these companies, what were you buying? A manufacturing company or a derivatives speculator? How could you tell the difference? In each case, the DPG salesmen vowed that they had not sold any of the exploding derivatives. In each case, rumors bounced throughout the firm, then died. It appeared that Morgan Stanley had dodged these bullets, too.

From the firm's perspective it was important to make as much money up front as possible on these trades. Take out a big fee, plant the time bomb, walk away, and wait. Of course, after the explosion the derivatives losers would sue, but as long as the firm had made enough money up front and could defend the lawsuit adequately, it would be fine. The important message I took from the disclaimers was this: The way you made money selling derivatives was by trying to blow up your clients.

Clever derivatives broke dozens of companies. It killed them. Bankrupt. We don't need these kinds of innovation in finance. It's OK to be boring in finance. What we want is innovation in widgets.

I think, for young people, and I think, for women, it's great to work in new products and derivatives products because, if you work in a plain-vanilla product, it's going to take you decades to get to a level where other people are. If you work in a brand new business, no one is more experienced than you are.

Every regulatory speech on derivatives takes a bow to their hedging 'benefits.' Less publicly, regulators pay their respects to derivative profits, a blessed relief from the banks' troubled loans to less-developed countries, highly leveraged companies, and real estate swingers.

We should probably stop trading derivatives, anything more complex than regular options ... I am an options trader, and I don't understand options. How do you want a regulator to understand them?