the.com/derivatives
betting on the weather without owning a single cloud.
means a financial contract whose value is derived from something else, like a stock, a rate, or the price of pork bellies.
from from the latin derivare, to draw off a stream — traders started using contracts in 17th century amsterdam and osaka rice markets to bet on future prices without touching the actual goods.
market sizenotional value estimated over 600 trillion dollars globally
warren buffettcalled them financial weapons of mass destruction in 2002
tulip maniadutch traders used futures contracts on tulip bulbs in 1636
2008 crisiscredit default swaps helped collapse the entire global economy
for instance
credit default swaps — insurance on debt that triggered aig's 182 billion dollar bailout in 2008
chicago mercantile exchange — world's largest derivatives marketplace, founded 1898 trading butter and eggs
long-term capital management — nobel laureates blew up a hedge fund on derivatives bets in 1998
oil futures 2020 — wti crude briefly traded at negative 37 dollars a barrel