Conclusion

Sumit Mehta, Simon Wilkinson

The range of derivative regulations covered in this book is a double-edged sword for their creators and critics alike. The true impact of the regulations will only be known when the next crisis hits, and with the help of perfect hindsight the risks that remain – and any new ones inadvertently created – will be obvious. By the time the dust settles, any perfect storm that has hit the US$700 trillion global derivatives market will have caused myriad side-effects, fundamentally changing derivatives pricing, destroying some business models and developing new sources of risk.

Therefore, it is interesting to pose the question: has regulation adequately achieved its core objectives of increasing transparency, mitigating counterparty default concerns and eliminating systemic contagion risk? If so, has that victory come at the cost of a greater loss? Readers will perhaps agree that the answers to this are mixed. Reporting requirements, while producing significant operational burdens, have not deterred end-user participants to the extent that was feared initially. Much of the post-crisis debate centred on the resulting increase in global collateral requirements, with some estimates putting

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: