i was answering in relation to your point about how a future is a forward. all i said was future and forward should be the only derivatives, perhaps futures are types of forwards. in any event even if they come in the same umbrella they are different. i would not read hull, i read macdonald. hull was the book the lecturer gave to the people who weren't smart enough to read macdonald. it is the equivalent of economics by david begg. the introduction level book. i have made my point already. there is a history that third world countries got stung. maybe they get just as badly stung by the other products but still the post was about shorting being prohibited. i was just saying what i would prohibit. if you read my posts you will see i am willing to hear other peoples arguments and i did. i still think there is a danger there. the point i am getting pissed about is i have made my point and you haven't read it. i made no claim to be right just made my opinion and then explained it. you are entitled to answer and have your opinion. but it stops there. you may think they have value. i did actually admit they might have some use but need assessment. after other commentators point. read the previous posts. in any event i am going to bed. p.s. there is another difference between the return of a bond and a swap. the bond is an investment and the investor will receive a return. there is no link to another cash flow. the situation i explained previously was this. the first world country had a cash flow that was stable. the third world country did not. the third world country had a supply shock this created inflation in turn interest rates rose. because the third world country made payments that were in real terms more expensive as a result of this reduction in output. higher cashflow payments were made and the stable first world country did not have a real payment increase due to its stability. as a result the payments made from the first world country did not compare to the relative payments from the third world country. a bond would take the other cash flow out of the situation. therefore the other cash flow is irrelevant. sweet dreams.
Where's your evidence that naked shorting caused their downfall? Bear in mind that many banks and financials went to $0 after ALL shorting (not just naked shorting) was banned in Sep 2008.
So in your opinion, it is legitimate to criminalize any activity that anyone has ever lost money on? That means you are in favour of criminalizing saving, investment, start-up companies, venture capital, research and development, marketing, government bonds, foreign exchange, stocks, commodities, putting money under the bed, selling, buying - in fact, every single type of economic or risk-taking activity that is possible.
if you actually read that comment. you will see that i said the situation should be reassessed. that means i did not fully stand by my first statement. i just said there are some downsides, which was an answer to someone else's post that there are no losers in interest rate swaps go back and read page one or two or where ever it is. you will see that. i do not want to argue this anymore. i am off to the land of nod. see you in the morning.
there is another danger with shorting. that is people make money when businesses fail. this is something that people can control like throwing a fight. there is incentive to fail.
It will. If you can't short an asset put-call parity no longer applies, and market makers can no longer hedge short puts with short stock. This causes puts to become more expensive relative to calls. So even if buying puts isn't forbidden it becomes more expensive. Stock holders who want to buy protective collars (long puts, short covered calls) will find this more costly to do. Thanks a lot, financial regulators!
No. The losses of the home owners had nothing to do with credit default derivatives, as home owners took neither side of those bets. They defaulted because they bought houses they couldn't afford. Some banks lost money on credit and default derivatives, but most lost money the old fashioned way, by winding up with a lot of bum mortgages that weren't being paid.
Never said, or implied, "caused." How many of them fell at the same rate and with trade volume several magnitudes above normal as LEH did during its last week of existence? I'm not advocating elimination of all shorting. But, naked shorting, like T+3 settlement and delayed short interest reports, they're all anachronisms in the digital age. It's inexcusable to not require all shares be located prior to executing a trade.
That's an argument against allowing principals and employees of a company to short their own stock. (I believe that most companies already have such policies in place.) But the idea that me shorting a stock on a company I have no relation to is going to cause the company to fail is silly. You could just as well argue against allowing people to go long on a stock since then they have an incentive to hype it, pump in on internet forums, trash its competitors, and so forth.