What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.
Institutions of the newer participants in global finance had not been tested, until recently…recent crisis have underscored certain financial structure vulnerabilities that are not readily assuaged in the short run.
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
