I need a response to discussion post below….a paragraph for both
1. The derivatives have been associated with a number of high profile corporate events which rolled the global financial markets over the past two decades. To some critics, derivatives have played an important near collapses or bankruptcies of Barings bank in 1995, Long-term capital Management in 1998, Enron in 2001, Lehman Brothers and American Financial Globe Group (AIG) in 2008. Warren Buffet even viewed derivatives as time bombs for the economic system and called them financial weapons of mass destruction (Berkshire Hathaway Inc., (2002)).
I believe if derivatives were properly used by a company, financial institution, banks, etc. they can bring economic benefits for each involved. These instruments help economic agents to improve their management of market and credit risks. They also foster financial innovation and market developments, increasing the market resilience to shocks. The main change to policymakers is to ensure that derivatives transactions being properly traded and prudently supervised. This entails designing regulations and rules that aim to prevent the excessive risk taking of market participants while not slowing down the financial innovation aspects. And also calls for improved data quantity and quality to enhance the understanding of derivatives markets.
I believe derivatives will continue on into the next two decades and into the future as well. As explained above I do believe that if policymakers can ensure that derivative transactions are being properly traded and thus prudently supervised. We stronger regulations and rules to prevent excessive risk taking in the market. The Feds believe there is a way to eliminate some of these concerns by having a central clearing house for credit default swaps. This can be considered like a convoy. By the end of the downturn, the pain of honoring default insurance will have been shared thus our financial system will be still standing.
Market volatility has been an issue that has bothered stock traders. There is a lot of information available yet not many people have been able to beat the market and make gains continuously (Graham & Pettinato, 2001).This has been attributed to steps made in technological advancement that have led to increased growth of the market. Technology availability means that there is a diverse menu of products that will be available and this will enable firms to offset prices (Gregoriou, 2009). They will also be able to contain the shocks of certain inputs such as oil by substituting them with other inputs that will rely less on them. Such advancement will lower volatility at firm level and in the overall the entire market volatility will be reduced. This will ensure that the stock market will have less challenges and it will be more lucrative to buyers of stocks. There have also been increases in portfolio available for households to invest in. As a result they have been able to smooth their returns and lowering loses.
Topics covered in this course will be crucial to career success. With information of how the market operates, one will be able to make informed decisions in regard to investing. People such as Warren Buffet have benefited very much form their education background and they have been able to make good investment decisions based on the knowledge they have gained. This shows how important some topics covered in this unit are very critical to career success. Knowledge on management has also been gained and thus it will be easy to run an organization such that issues to do with financial management will be dealt with in an efficient way.