The advantages and disadvantages of exchange traded derivatives.

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Issue:

Business

 

Written by:

Charles S

 

Date added:

April 24, 2014

 

Level:

University

 

Grade:

A

 

No of pages / words:

8 / 2022

 

Was viewed:

7468 times

 

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Essay content:

Those who use derivatives as a way of managing risk are called hedgers. Martin Taylor, former Group Chief Executive of Barclays, compare risk with energy; “Risk is neither created, nor destroyed, merely passed around.” This is where the speculators play an important role in the derivatives market...
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The speculators have no interest in the underlying itself, but for the possibility of a reward they are willing to accept a certain level of risk. Without the speculators the derivatives markets would not function. The third group of players in this market is the arbitragers. These people look for mis-pricing and market mistakes, this give them a risk-free profit, a situation that gets the mistakes to disappear before becoming too large...
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