Which scares derivatives professionals more – the global economic downturn or rampant regulators? It should be the recession, but politicians are certainly giving futures and options specialists some sleepless nights. There is good reason for the industry to be frightened, but regulators also have plenty of cause to go on the warpath.
Look at Poland, where reckless use of currency options has brought calamitous losses to over 100 companies. The same scandal is raging around the world, from Brazil to Indonesia.
In the US, Bernard Madoff’s $50bn rip-off looks like being one of the world’s worst ever frauds – and his purported investment strategy, if he had actually invested any money, involved using equity options.
And prices of some commodities and other products such...