A New Derivative

What was all that about derivatives being finanial weapons of mass destruction? Not any more!

Chicago-based Actuarials Holdings, parent company of the Everest OTC Trade Facility and the AE Clearinghouse, has unveiled what it says is a revolutionary ‘safe’ derivative called the Clipper that enables traders to control total risk, highly leverage their capital, and eliminate counterparty risk.

It’s actually an interesting idea. From what I can make out, Clippers act a bit like puts and calls, but with an embedded knock-out which cuts off tail risk. And because they are filled in a dark pool, they claim to have no counterparty risk.

I can’t find much more information on these Clippers at Actuarials’ website, but if y’all have any questions for them, I’ll send them on over. I guess my first question would be whether these things can be used on bonds, or whether they’re confined to stocks. And also, of course, how much they cost.

This entry was posted in derivatives. Bookmark the permalink.