| There is much talk today about financial derivatives | | | | same time, thousands of home buyers began to |
| and their impact on the current economy. In a basic | | | | default on the loans because of ballooning interest |
| way, this article discusses what derivatives are and | | | | rates. The misuse of this type of financial derivative |
| which of all derivatives are the most lucrative and | | | | is one major cause of the economic crisis we are |
| valuable. | | | | now experiencing. |
| A Definition of Derivatives | | | | So, to recap, a derivative is a contractual relationship |
| Rutledge and Bertram (1995) explain, "...a derivative is | | | | where the value of one commodity or service is |
| a contractual relationship established by two (or | | | | derived from what another person or company will |
| more) parties where payment is based on (or | | | | pay or give up for it. However, as we can see in the |
| "derived" from) some agreed-upon benchmark." So in | | | | case of credit swaps, not all derivatives or |
| short, a trade is made between two parties where | | | | contractual agreements are wise investments and in |
| the perceived value of one thing is derived from the | | | | fact, many investors are losing large amounts of |
| perceived value of another thing. | | | | money and financial net worth because of their |
| A Few Examples of Derivatives | | | | failure to pay as promised. |
| For instance, a wheat farmer and a corn grower may | | | | The World's Most Valuable Derivative |
| agree to make a three-year deal to trade three | | | | There is one unique type of derivative that will never |
| bushels of wheat for two bushels of corn. This is | | | | fail or lose its value. This type of contract is the |
| done to stabilize the value of the two products | | | | soundest investment ever devised. The world's most |
| regardless of the relative supply and demand of each | | | | valuable derivative is you and every other human |
| product. | | | | being who has ever lived on the earth. For you |
| Another example of a derivative is a contractual | | | | derive your worth from God's opinion of you. From |
| agreement between an oil producing nation like Saudi | | | | the beginning of time, God, the creator of heaven |
| Arabia and an oil brokering company like Exxon-Mobil. | | | | and earth and you, made a unilateral contract with |
| This time the contract is not based on the trade of | | | | you and me and every other person from every |
| two commodities; rather, one commodity, e.g. a | | | | nation and culture on earth. That contract came by |
| barrel of oil, is valued against the exchange value of | | | | way of a promise to the first man and woman that |
| currency, e. g. the US Dollar. For instance in 2008, the | | | | He would send a redeemer to buy us back as his |
| price of oil fluctuated between $40 and $145 per | | | | own. |
| barrel. As the price of the oil was rising in the first | | | | The price he was willing to pay and has paid is the |
| half the year, an oil brokering company like Exxon | | | | life of his own Son in exchange for our lives. Jesus |
| Mobil could have signed a long-term contractual | | | | Christ, the Son of God, stepped down from his royal |
| agreement with Saudi Arabia to purchase the oil at | | | | throne and stripped out of his royal clothes in order |
| $75 per barrel throughout the term of the contract. | | | | that he might sacrifice himself for you and me. In |
| This means even if the price went up to $100, Exxon | | | | doing so, God proved that you are the most valuable |
| Mobil would pay only $75 and, vice versa, if the price | | | | investment in the history of this world. |
| dipped to $35 per barrel, as it did in February 2009, | | | | Even if all the human financial derivatives fail to pay |
| Saudi Arabia would still receive $75 for the duration | | | | as promised, there is one derivative that will never |
| of the contract. | | | | lose its value. Your life has been deemed to have |
| Another type of derivative is a credit swap. These | | | | eternal value by the one who is the true judge of |
| types of derivatives are tied to the mortgage crisis in | | | | value and worth, the Lord God Almighty maker of all |
| the United States' housing market. After making | | | | things. No matter who you are or what you have |
| sub-prime loans to many private citizens, mortgage | | | | done, He wants a personal relationship with you. |
| companies sold the loan contracts to investment | | | | Understanding your true worth in God's sight is the |
| brokers like Lehman Brothers who bundled them as | | | | most lucrative investment you can make in your life. |
| investments and re-sold them to other investment | | | | If you want to have a personal relationship with him |
| firms like insurance conglomerate AIG. Soon the | | | | and come to know your true value, simply speak the |
| paper value of the credit swap agreements outpaced | | | | words and He will touch you where you are today. |
| the value of the investments themselves. At the | | | | |