The Economics of Derivatives

This book examines the beneficial and adverse effects of derivatives trading from economic theory and the recent economic history.

T. V. Somanathan (Author), V. Anantha Nageswaran (Author)

9781107091504, Cambridge University Press

Hardback, published 2 March 2015

269 pages
24.1 x 16 x 2.6 cm, 0.58 kg

'… this book is well researched and includes excellent references … recommended.' E. Kacapyr, Choice

While most books on derivatives discuss how they work, this book looks at the contributions of derivatives to overall economic well-being. It examines both the beneficial and adverse effects of derivatives trading from the perspectives of economic theory, empirical evidence and recent economic history. Aiming to present the concepts in a fair, non-ideological, non-mathematical and simple manner, and with the authors' own synthesis, it draws on economic insights from relevant work in other disciplines, particularly sociology and law. The book also presents some new theoretical ideas and recommendations towards a pragmatic and practical approach for policy-makers. The ultimate objective is to provide a basic conceptual framework which will help its readers form a judgement on whether, when and how derivatives are beneficial or harmful to the economy.

1. Introduction
2. Definition and typology
3. The economic functions of derivatives markets
4. Market completion
5. Derivatives and price stabilization
6. Derivatives and price destabilization
7. The effects of derivatives on prices of the underlying: a synthesis
8. Causes of the rapid growth in derivatives trading: a historical perspective
9. The role of derivatives in the global financial crisis of 2008
10. Models and their effects on markets
11. Derivatives and emerging markets
12. Derivatives and emerging markets
13. Regulation of derivatives
14. Derivatives and development: a critique
15. Regulatory policy for derivatives: a pragmatic approach.

Subject Areas: Finance [KFF], Development economics & emerging economies [KCM], Economics [KC]