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by dpc_pw
2084 days ago
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There are people who buy derivatives for practical rational reasons as well - e.g. producers who want to lock the price of pork belies, or business hedging currency risk in an international transactions. In a normal market If people are crazy-buying TSLA stock, TSLA can issue more stock. If people are piling crazily into corporate treasuries and the yields are going down, corporations will issue more debt (and e.g. buy back more of their own stocks). When people were pilling up into a housing bubble in 2005, the builders were creating mc mansions like crazy as well. All the financial assets are prone to systemic over leveraging, and fiat money central bank induced bubble is affecting absolutely every asset: housing, debt (private & public), equity, derivatives. Different things explode at the time, and central banks need to run to the rescue by blowing the bubble even bigger. If it weren't for fiat money bubble, derivatives would be mostly rational markets as well. |
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