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"Derivatives" Please respond to the following: The use of derivatives within financial institutions is considered to have...

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Finance

"Derivatives" Please respond to the following:

  • The use of derivatives within financial institutions isconsidered to have contributed the financial crisis in 2008. Assesshow the use of derivatives contributed to significant losses in thefinancial industry, indicating how such losses may be mitigated inthe future. Provide a rationale for your response.
  • Some economists and bankers believe that derivatives make themarket safer. Agree or disagree with this statement, providingsupport for your position.
  • Please provide one citation/reference for yourinitial posting that is not your textbook. Please do not useInvestopedia or Wikipedia.

Answer & Explanation Solved by verified expert
4.0 Ratings (466 Votes)
Financial development in derivatives and securitization controlled by a leeway fiscal strategy made an air pocket in the housing and creditsupply markets This was blasted when the subprime mortgage crisis hit in 2007 Before major mechanical changes for example the railroad or the web have been accompanied by theoretical air pockets in a foundation of awry data and onesided forecasts and the impacts of financial development on derivatives and securitization are no special case to this authentic pattern New improvements in information technology have entwined intermediairies and the financial markets inseparably The significance of a banks investment portfolio at market worth has expanded significantly in light of the fact that there are presently more open doors for exchanging resources which implies that the hazard profile of a financial institution can change in merely seconds with financial market exchanges for instance utilizing online business and derivatives 1 The financial industry has expanded its market subsidizing    See Answer
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