Posted: June 8th, 2016

Discuss why derivative markets are better suited to control some risks (commodity price changes, natural disasters) than other financial or insurance markets.

Discuss why derivative markets are better suited to control some risks (commodity price changes, natural disasters) than other financial or insurance markets. For instance why did active derivative markets develop for catastrophe insurance and credit default swaps? Why might derivative markets prove ineffective? For example, what went wrong with the market for credit default swaps?