Derrivative financial instruments were one of the vehicles that led to an unseen crisis that global financial market is reeling from. In full financial squeeze, U.S analysts forecast a pass out of these cutting-edge instruments, whereas investments banks in Romania say we will not witness the demise of any financial product that emerged in purpose of meeting clients’ needs.
More than five years ago, Warren Buffet, one of the world’s most successful and wealthiest businessmen, warned in the annual letter to shareholders of Berkshire Hathaway on the rapidly growing trade in derrivative as a “time bomb” that could harm entire economic system. This was one of the all-time grimest verdicts ever made on the global economy.
Mid last week, Warran Buffet announced in a media briefing he considers pumping USD 5 billion into Goldman Sachs, in an effort to enhance trust in financial markets.
This public statement led to a debate among American analysts on if we will witness the “pass-out of derrivatives that Warren Buffet called “financial weapons of mass destruction”.
The status of US market has all chances in becoming a financial soap opera, if we cannot control our reactions and to have a thorough assessment on crisis’ backgrounds, without making a drama out of it” said Doru Lionachescu, the main partner of Capital Partners, who estimates we will not witness any fade-out of a financial product that emerged as a response to clients’ needs. “We will probably see a resizing or risks that derrivative instruments entail, that is all – human nature is not fundamentally changing” Lionachescu stressed.
Romanian-based banks have implemented derrivatives in their protfolios, instruments designed to shield against unfavorable evolutions of currency exchange rate or interest.
Derrivatives, time-boms for financial market?
Named by billionaire W
