John Mayer's Real Estate Blog: Derivatives and the Economic Crisis

Derivatives and the Economic Crisis

Derivatives are playing a huge role in the current economic crisis and one of the world's wealthiest men tells us why.

Billionaire Warren Buffett has devoted nearly five pages of his letter to Berkshire Hathaway shareholders to explaining the role derivatives played in the company's nearly $7.5 billion investment losses last year.

Click on this link or cut and paste it in your browser to read the five pages:  


What are they?

Effectively an ability to swap by way of a Contract For Difference (CFD) the total return from the IPD property index for a fixed percentage return over an agreed number of years, ending on 31st December of the final year.

How can they be used?

Property derivatives can be used for managing risk within a portfolio, gaining instant access to a market or submarket, speculating on sectors of the market, rebalancing portfolios and hedging exposure to specific assets or sectors.



Comment balloon 0 commentsJohn Mayer • February 28 2009 10:11AM