Huge wrote:
On 2009-12-18, Steve Firth wrote:
Huge wrote:

On 2009-12-18, Steve Firth wrote:
The Natural Philosopher wrote:

If you like, buting a race horse and winning a race with it, is the
normal stock market.

Placing a bet on the horse is a derivative.
No.

Buying a horse and winning a race with it is commerce.

Placing a bet on the horse is the normal stock market.

Coming up with a seven race accumulator is derivative trading.
Nope. Accumulators are no different to placing a bet using the winnings
of the previous bet.

Placing a bet on a horse and then reselling that bet would be a derivative
trade. The value of the resold bet would rise and fall as the odds on
the underlying "asset" (the actual bet placed on the nag) changed.
Accepted, but there's no real equivalent in horse racing to derivative
trading. Accumulators were as close as I could come. It shows up what a
crappy analogy horse racing is as far as financial markets are
concerned.

Yep.

I can't think of a good "real world" example of a derivative that would
have any relevance to the man in the street.



Any insurance.
Any betting on a sport.
Guarantees.

These are all contracts of value that relate to (derive from) the value
of something else, but are in essence not an actual share in it.