Administering Systemic Risk vs. Administering Justice: What Can We Do Now that We Have Agreed to Pay Differences?
Professor Stout's brilliant concept of disagreement-based speculation (in "Risk, Speculation, and OTC Derivatives: An Inaugural Essay for Convivium") calls for further developments and studies concerning implications for stability and resilience of the financial system over time. Moreover, it also suggests rediscovering and situating the socio-economic function of finance (and financing) in the economy and society. To complement this approach, we recall the European acceptance of "paying differences" since late nineteenth century. Derivative assets were traded in Europe, but the underlying assets (stocks and bonds) on which derivatives are built were authorized beforehand. Marteau and Morand (2010) recently appealed for reintroducing an a priori authorization procedure before new derivative assets can be marketed: this view thus inherits a century-long tradition. Eventually, it seems that a priori authorization allows for administration of systemic risk while common law-inherited rejection of disagreement-based speculation is a strong foundation for both supervisory and legal (a posteriori) decisions.
|Date of creation:||Jan 2011|
|Date of revision:|
|Publication status:||Published, Accounting, Economics, and Law A Convivium, 2011, Article 10|
|Note:||View the original document on HAL open archive server: http://hal-paris1.archives-ouvertes.fr/hal-00605180/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
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- René M. Stulz, 2004.
"Should We Fear Derivatives?,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(3), pages 173-192, Summer.
- Gunther Capelle-Blancard, 2009. "Les marchés dérivés sont-ils dangereux ?," Revue économique, Presses de Sciences-Po, vol. 60(1), pages 157-171.
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