Futures are still technically gambling. (…)
There’s always a chance that the underlying asset radically changes in value between the contract and execution dates.
Sure, I agree. But in the same technicallity; purchasing or selling anything is technically gambling, there’s a chance that it will devalue or increase in value over time. You could’ve bought (or sold) earlier (or later). (Electricity market, again, being an interesting exception, as the product is destroyed as soon as it’s created. One could say the true value is never discovered, as it’s only sold as futures).
The MBS market basically directly lead to the '08 crisis, as you certainly know.
The fundamental problem that lead to the '08 crisis was incorrectly priced mortgages, and risk of repayment/devaluation. Even if the morgages were held by the original issuers, the same outcome would’ve occured.
It wasn’t the derivative market that was the problem.
An example of a derivative, that I can’t think of any reason for existing, other than increasing risk, are leveraged ETPs. I’d call those as close to pure gambling of any derivatives I know of.
Those mortgages were priced incorrectly because the derivatives market inflated their value. There were other factors that contributed certainly. The credit rating agencies certainly played a critical role, but they were incentivized to inflate their rating because of the MBS market.
The regulation of these markets was also to blame, and that’s a whole other can of beans, but again this was due mostly to the revolving door between the regulatory agencies and the investment funds that profit from lax regulation of the derivatives market.
Sure, I agree. But in the same technicallity; purchasing or selling anything is technically gambling, there’s a chance that it will devalue or increase in value over time. You could’ve bought (or sold) earlier (or later). (Electricity market, again, being an interesting exception, as the product is destroyed as soon as it’s created. One could say the true value is never discovered, as it’s only sold as futures).
The fundamental problem that lead to the '08 crisis was incorrectly priced mortgages, and risk of repayment/devaluation. Even if the morgages were held by the original issuers, the same outcome would’ve occured.
It wasn’t the derivative market that was the problem.
An example of a derivative, that I can’t think of any reason for existing, other than increasing risk, are leveraged ETPs. I’d call those as close to pure gambling of any derivatives I know of.
Those mortgages were priced incorrectly because the derivatives market inflated their value. There were other factors that contributed certainly. The credit rating agencies certainly played a critical role, but they were incentivized to inflate their rating because of the MBS market.
The regulation of these markets was also to blame, and that’s a whole other can of beans, but again this was due mostly to the revolving door between the regulatory agencies and the investment funds that profit from lax regulation of the derivatives market.