GLOBAL FINANCIAL-MARKETS, DERIVATIVE SECURITIES, AND SYSTEMIC RISKS

The global use of derivative instruments has grown in importance, beca use they are less expensive tools for hedging risks and for investing in securities. Because several entities have incurred substantial loss es in derivatives, leading to bankruptcy in a few cases, and because t he size of the derivative market appears so large, legislators and reg ulators around the world, who have limited information about derivativ es, fear that further possible bankruptcies pose a systemic risk to th e economy. This fear is unwarranted. Affected entities will continue t o make infrastructure investments to support their valuable derivative business, a more beneficial alternative to political solutions.