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The Ascent of Derivatives

Futures, Options and Swaps Throughout History

Warren Buffett once famously referred to them as “financial weapons of mass destruction”. To Yanis Varoufakis, former Greek Minister of Finance and outspoken critic of modern capitalism, they are “opaque financial instruments”, responsible for catalyzing the 2008 financial crisis. Indeed, the view that derivatives are synonymous with capitalism in its most reckless form is one shared by many. Whilst it’s easy to simply label them as complex financial products designed by unprincipled bankers for the sole purpose of their enrichment at society’s expense, there is no doubt that they play an integral role in modern financial markets. Today, estimates of…

In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffett once famously described derivatives as “financial weapons of mass destruction”. Whilst his view was founded on matters such as counterparty risk and the unregulated nature of the derivatives business, there exists a financial instrument to which his description is rather befitting. Having been brought into the limelight by the global coronavirus pandemic, catastrophe bonds are one of the most fascinating, innovative approaches to financial instruments. The simplest explanation is that catastrophe bonds (or cat bonds) are debt instruments whose coupon and principal payments are contingent on the occurrence of a…

Algorithmic Stability and the Role of Automated Monetary Policy in the Decentralized Economy

A Brief History of Money

Money can be analyzed using three key functions: as a medium of exchange, a unit of account and a store of value.

The Histories of Herodotus teach us that the Lydians were “the first of men, so far as we know, who struck and used coin of gold or silver”. The Lydian “stater”, created from a mixture of gold and silver known as electrum, is largely considered to be the first currency ever created. The key feature that distinguishes the stater from other forms of money was the fact that it was issued by a central authority. …

Adam Wright

Wholesale Banking @ING. Probably reading/ writing about financial engineering, disruptive tech or economic history.

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