Financialderivatives can be
defined as instruments whose price is derived from an underlying
financial security. The price of the derivative is linked to the
price of the underlying asset and arbitrage maintains this link.
This makes it possible to construct hedges using derivative
contracts so that losses (gains) on the
The early part of the twenty-first century has witnessed a sea-change in regulation of the financial system following the financial crisis of 2007-2008. Prior to that financial crisis, the official policy was directed to deregulating the financial system, whereas after 2008 the move is towards increased regulation. This book begins the study of the UK financial system with an introduction to the role of a financial system in an economy, and a very simple model of an economy. In this model the economy is divided into two distinct groups or sectors. The first is the household sector and the second is the firms sector. The book describes the process of financial intermediation, and in doing so, it examines the arguments as to why we need financial institutions. It highlights the nature of financial intermediation, and examines the various roles of financial intermediaries: banks as transformers, undertaking of transformation process, and providers of liquidity insurance. The nature of banking, the operations carried out by banks, and the categories of banking operations are discussed next. The book also examines the investment institutions and other investment vehicles. It examines the role of central banks in the financial system in principle, particularly, the role of the Bank of England. Primary market for equity issues, secondary market, the global stock market crash of October 1987 and efficient markets hypothesis are also covered. The book also looks at the trading of financial derivatives, risk management, bank regulation, and the regulation of life insurance companies, pension funds.
As the tragedy of the Grenfell Tower fire of 14 June 2017 has slowly revealed a shadowy background of outsourcing and deregulation, and a council turning a blind eye to health and safety concerns, many questions need answers. Stuart Hodkinson has those answers. Safe as Houses weaves together Stuart’s research over the last decade with residents’ groups in council regeneration projects across London to provide the first comprehensive account of how Grenfell happened and how it could easily have happened in multiple locations across the country. It draws on examples of unsafe housing either refurbished or built by private companies under the Private Finance Initiative (PFI) to show both the terrible human consequences of outsourcing and deregulation and how the PFI has enabled developers, banks and investors to profiteer from highly lucrative, taxpayer-funded contracts. The book also provides shocking testimonies of how councils and other public bodies have continuously sided with their private partners, doing everything in their power to ignore, deflect and even silence those who speak out. The book concludes that the only way to end the era of unsafe regeneration and housing provision is to end the disastrous regime of self-regulation. This means strengthening safety laws, creating new enforcement agencies independent of government and industry, and replacing PFI and similar models of outsourcing with a new model of public housing that treats the provision of shelter as ‘a social service’ democratically accountable to its residents.
inner temporal expansion whereby
currency and interest rate fluctuations are traded instantaneously by
automated systems. De-framing takes place too on the linguistic and cognitive
level: the Classical modern narrative framing of political economy, from Adam
Smith and Marx through Keynes and Friedman, has been superseded since the
1970s so that economics in general and financialderivatives trade in particular take place on the basis of mathematical models and algorithms that even
financial services professionals themselves scarcely understand. The global
valued the technological innovations; the ‘development of paradigms for containing risk to those willing and presumably able to bear it; the ability of modern economics to absorb unanticipated shocks’; lenders becoming considerably more diversified; the growth of the secondary mortgage market and the growth of financialderivatives.
Conceptual advances in pricing options and other complex financial products … have significantly lowered the costs of and expanded the opportunities for hedging risks. If risk is properly dispersed
was to be found. Derivatives traded between ‘sophisticated parties’ were not regulated, except as part of the general ‘safety and soundness’ overseen by the regulators of banks and securities firms. 29 Alan Greenspan, giving testimony at a Senate hearing in 2000, quoted with approval the report of the President's Working Group of which he had been a member, stating that
regulating financial over-the-counter derivatives, involving professional counterparties was unnecessary … as financialderivatives are not readily subject
Class polarisation and neo-liberalism in the Irish Republic
FIRE – finance, insurance and real estate – overtook that of the whole of manufacturing industry.13 The growth in the
financial sector led to even greater pressure for higher dividend payments, which in turn were used to buy new shares and other financialderivatives. In the 1970s, dividend payments amounted to sixteen per
cent of profits but by 1996 they had risen to thirty-six per cent.14
Neither Boston nor Berlin
Companies also came to borrow more on the basis of their rising paper
values and for a period this fuelled the
particularly strong among the bankers themselves!
9 The importance of growth in what I called ‘areas of significant ignorance’ was
one of the conclusions made in Casino Capitalism (see Strange 1986: 128 ff.).
10 Cornford (1995) also gives detailed accounts of the 1985 default and closure
of the London tin market; the strains on the US system in the October 1987
crisis; the Barings collapse in 1995; and the bankruptcies of the Bank of New
England and DBL, among other financial firms that dabbled, too riskily, in
11 See Keohane and
2.7.3 Financial innovation
The last 30 years have seen the
development of new types of financial instruments, financial markets
and techniques. One of the main innovations has been the development
of financialderivatives, initially exchange traded but now also
traded ‘over the counter’. These include a wide range
of financial futures, options