I won't lie to you... i didn't read your entire post, or half or even a quarter of it so i may have completely missed the point. But I think this is the point you are trying to make: people just need a low cost, efficient way to exchange information in an honest and trasparant manner... then we wouldn't need all these fancy derivatives.


And thats true... if you really break finance down to its core, its all about risk and the price of risk. THere are sellers of risk and buyers of risk and they come together in a marketplace and establish a price. This is true for bonds, stocks, and all their related derivatives. The point i want to make is that while derivatives have gotten a bad name in the press, they are a vital tool in facilitating the exchange of risk and allowing for the further development of an efficient capital allocation system.


If you really think about it, everything is a derivative. People tend to think in terms of derivatives and underlying securities like stocks and bonds, but they're all really the same thing: just instruments, tools to move risk around. What complex derivatives allow people to do is to definte more precisely the nature of the risk being traded and to customize this according to one's needs.