Don't Blame Derivatives

Walker, Susanne
December 2004
Bond Buyer;12/10/2004, Vol. 350 Issue 32027, p1
Trade Publication
The article focuses on the municipal market participants's views on the role and impact of derivatives in the financial debacle in the U.S. Some derivative experts argue that the orange country bankruptcy was caused by flawed investment policies and practices and not because of derivatives. They note that Orange County in 1994 invested partially in inverse floaters, a risky form of derivatives that bet on the direction of interest rates to raise funds. The key problem was not with derivatives, it was leverage. The bankruptcy and its association with derivatives came around the time corporate investors were also seeing widely publicized losses in derivatives.


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