Derivatives: Financial Dynamite Operating in the Shadows…

By | March 16, 2020

With unprecedented volatility in the financial markets that’s been brought on by the international spread of coronavirus, and the economic backlash associated with it, is potential systemic risk to the global financial system lurking ‘out there’ in an obscure and often little understood investing vehicle (even for its buyers)…

DERIVATIVES!

Back in 2015, then reposted in 2019, Hallmark Abstract Service wrote an article on the derivatives market and the unknown risks that these incredibly complex contracts could pose to stocks, bonds, real estate, commodities, banks, hedge funds, etc. And yes, even to title insurance companies and every other type of company in the economy were triggers to mandate payment to one side of a contract. These payers on the losing side of a bet are known as the counterparty to the contract. The associated risk that they cannot pay for one reason or another is known as counterparty risk.

Examining the charts below, consider the speed and violence of the one month moves made by just these products, likely catching most if not all participants flatfooted. Then, extrapolate similar moves to most every financial market…

(Charts courtesy of CNBC)

For a deeper discussion of the derivatives market, one that operates largely in the shadows, please read further at the Hallmark Abstract Service article below…

Derivatives 101: Great Financial Tool Or Sinister Financial Time Bomb? – Update

Mike Haltman, CEO
Hallmark Abstract Service LLC

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