Of course it is not the products that should be questioned, but the inappropriate uses of them. The existence of risks is not bad, they are always there, but if people who buy financial products are not informed about the risk of these products, this is extremely dangerous for the whole market. Complicated financial derivatives can complete the market, indeed, but it is difficult to make every buyer fully understand the mecanisme, so they will be less used, because of stricter governmental regulation, of simply because market self regulation as investors become more risk averse.
Mathematics worked because people created the derivative that no other understand can make a huge sum of money, by the asymmetry of information. But funtamentally, derivatives are created for hedging risks, not for speculation.
With the currenct crisis, people will need enough time to think about these questions, to create a system that works.
Of course it is not the products that should be questioned, but the inappropriate uses of them. The existence of risks is not bad, they are always there, but if people who buy financial products are ...
不若痕 发表于 2009-5-8 13:14
同意你说的But funtamentally, derivatives are crea ...
lyd1213 发表于 2009-5-8 14:19
For example, a investment bank's sales department's main job is selling products that traders do not want any more to foolish investors like Savings and Loan Association Presidents (called thrifts)...Check out Micheal Lewis' Liar's Poker you can see how people of Saloman Brothers treated their clients, and how MBS flourished in US.
One of the reasons for this current crisis is exactly the transformation of investment bank's business model from Originate-to-Hold to Originate-to-Distribute, so that "toxic asset" were distrubuted to unconscious investors, and I am sure that there do are investment bankers' who don't understand these products at all. To be an investment banker you only need to know making money, you needn't know how it works, all you have to do is to sell it later to others and get your part of the cake. The only problem is that today nobody want to buy them at all, so they do are losing lots of money as they are obliged to hold them in their balance sheet, and the price mark-to-market of these MBS are simply zero (the market is completely illiquid, it seems tha today the only buyer is the Mr. Geithner...)
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