Posted: October 18th, 2016

Have derivatives securities contributed to or amplified the Global Financial Crisis? If so, is tighter regulation of these products the answer to avoid future disasters (i.e. you may debate the pros and cons of tighter regulation)

Unit 6 provides a basic background knowledge of derivatives to firm up your exposure to current/ongoing news media. Although here the focus is on options on stocks, the concepts developed are also applied to how to analyse corporate debt securities. With this background you would be able to explore more the options market details on the ASX website or many other exchange websites. Have a look at an example attached to get an idea of how options are reported in the market. For this week�s activity, let�s have a debate on two important questions: 1. Have derivatives securities contributed to or amplified the Global Financial Crisis? If so, is tighter regulation of these products the answer to avoid future disasters (i.e. you may debate the pros and cons of tighter regulation). 2. Do executive/employee stock options add value to the firm? For senior management and some/many staff, employee stock options have become a very important part of their overall compensation. You are already aware of these options as part of the compensation packages. Based on your understanding of the value derived by options contracts, comment on the impact these contracts might have on the behaviour of the senior managers/employees of a firm. You may like to explore employee/management stock options issued by some companies