Hedging, Speculation, and Systemic Risk
JOURNAL OF DERIVATIVES, Vol 2 No. 4
Posted: 10 Oct 1998
Abstract
Investors like to speculate. Financial institutions accommodate them, often hedging to reduce the risk of insolvency. Neither investors nor financial institutions create systemic risk. Governments do that, by refusing to enforce contracts, and by guaranteeing private debt without charging market rates for the insurance they are providing. Then governments ask for tax money so they can regulate to reduce the systemic risk they themselves have caused.
JEL Classification: G20, G28
Suggested Citation: Suggested Citation
Black, Fischer, Hedging, Speculation, and Systemic Risk. JOURNAL OF DERIVATIVES, Vol 2 No. 4, Available at SSRN: https://ssrn.com/abstract=6363
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