Hedging, Speculation, and Systemic Risk

JOURNAL OF DERIVATIVES, Vol 2 No. 4

Posted: 10 Oct 1998

See all articles by Fischer Black

Fischer Black

Sloan School of Management, MIT (Deceased)

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

Black, Fischer, Hedging, Speculation, and Systemic Risk. JOURNAL OF DERIVATIVES, Vol 2 No. 4, Available at SSRN: https://ssrn.com/abstract=6363

Fischer Black (Contact Author)

Sloan School of Management, MIT (Deceased)

N/A

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