DO YOU KNOW WHERE YOUR DERIVATIVES ARE?

Ann Galligan Kelley

Global Journal of Business Research, 2012, vol. 6, issue 4, 85-95

Abstract: This paper is designed to assist individuals and organizations in understanding the role and risks of derivatives in two specific areas -- debt management and investing. The various risks associated with derivatives are discussed in this article. Similar to collateralized debt obligations (CDOs) and CDOs squared, derivatives also have the potential to be the next financial engineering bubble to burst. The SEC is concerned that investors do not understand the risks with more complex ETFs and abbreviated disclosures. Institutions, including Harvard University, have already lost millions on interest rate swaps. Individuals and organizations should take the time to educate themselves as to the serious potential risks involved with these instruments.

Keywords: Derivatives; Exchange-traded Funds; Leveraged; Futures Contracts; Counterparty Risk; Tracking Errors; Lack of Transparency; Swaps; Counter Party Risk (search for similar items in EconPapers)
JEL-codes: G01 G15 G24 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:gjbres:v:6:y:2012:i:4:p:85-95

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