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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.
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