We all suffer if derivatives are treated like drugs
Complexity is an inherent aspect of almost all human progress, but can also be a source of danger. In light of the global financial crisis, countering this danger understandably remains high on the policy agenda. Important as this is, David Rowe continues to argue that regulating new derivatives like new drugs would be a step too far
I have written several times in the past about the role and potential dangers of complexity. Recent years have seen it become one of the animating themes in the prudential regulation of derivatives. Early last year, Avinash Persaud offered an informed and well-balanced discussion of the issue in the annual Financial Stability Review from the Banque de France.
Persaud points out that too much of
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