Financial Derivatives Quotes

We've used derivatives for many, many years. I don't think derivatives are evil, per se, I think they are dangerous.

Credit-default swaps remedied the problem of open-ended risk for me. If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it.

Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get the average volatility right. It makes a big difference as far as hedging is concerned.

I think people have to be very careful with new ideas [in fiancé and economics]. What you need to worry about is when you have something that’s a really good idea, but you get too much of it too fast, like over-the-counter derivatives.

Everyone caved, adopted loose [accounting] standards, and created exotic derivatives linked to theoretical models. As a result, all kinds of earnings, blessed by accountants, are not really being earned. When you reach for the money, it melts away. It was never there. It [accounting for derivatives] is just disgusting. It is a sewer, and if I'm right, there will be hell to pay in due course. All of you will have to prepare to deal with a blow-up of derivative books.

Credit default swaps were nothing more than souped up versions of things that have been around for a long time like soy bean futures

Derivatives are like sex. It's not who we're sleeping with, it's who they're sleeping with that's the problem.

If there were not derivatives, there would be no bank loans at all today, because people want to get fixed-rate 30-year loans, but banks don't want to keep 30-year loans on their books.

With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.

Life can be lived at a remove. You trade in futures, and then you trade in derivatives of futures. Banks make more money trading derivatives than they do trading actual commodities.

The people who did the collateralized mortgage obligations, sold them to pension funds, then sold them short, then bought credit default swap insurance on them, are just amazing. They are a law unto themselves.

In an ideal world, one populated by vegetarians and Esperanto speakers, derivatives would be used for one thing only: reducing levels of risk. The list of individual traders who have lost more than a billion dollars at a time betting on derivatives is not short.

Financial hydrogen bombs built on personal computers by 26-year-olds with MBAs.

In the case of a meltdown, the regulatory authorities may find themselves obliged to step in to preserve the integrity of the system. It is in that light that the authorities have both a right and an obligation to supervise and regulate derivative instruments.

My principal contribution to the Black-Scholes option-pricing theory was to show that the dynamic trading strategy prescribed by Black and Scholes to offset the risk exposure of an option would provide a perfect hedge in the limit of continuous trading.

We should probably stop trading derivatives, anything more complex than regular options ... I am an options trader, and I don't understand options. How do you want a regulator to understand them?

The collateralized debt obligation, the CDO, is a structure which allows you to more or less continuously choose how much risk you want to take in a whole batch of securities. And the reason why they got us into so much trouble is that it's hard to figure out how much risk you really are taking.

I was able to use credit default swaps to protect not only my investments but the hundreds of jobs that exist because of my investment. I understand the dangers of credit default swaps and the benefits of credit default swaps.

As the financial experts all over the world use machines to unwind Gordian knots of financial arrangements so complex that only machines can make - 'derive' - and trade them, we have to wonder: Are we living in a bad sci-fi movie? Is the Matrix made of credit default swaps?

The options and futures traded on exchanges are derivatives contracts.

The world of finance is a mysterious world in which, incredible as the fact may appear, evaporation precedes liquidation.

I mean, they were getting the mortgage of some guy in Omaha, you know, securitized a couple of times. I mean he had all these - they had all these types from Wall Street, you know, and they had advanced degrees, and they look very alert, and they came with these - they came with these things that said gamma and alpha and sigma and all that. And all I can say is beware of geeks, you know, bearing formulas. They've heard that in Europe.

I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools.

The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen). Say you want to write a contract speculating on the number of twins to be born in Nebraska in 2020. No problem-at a price, you will easily find an obliging counterparty.

The Orderly Liquidation Authority prescribed by Dodd-Frank should be repealed and replaced by an amendment to the U.S. Bankruptcy Code which would operate to prevent cross-default provisions from impacting derivatives books so long as mark-to-market payments are being made in a timely fashion.