Why creativity in the industry should be allowed.
This subject provokes sincere soul searching. After all, the
line between what is prudent risk management and what is
betting is elusive.
The Dodd-Frank Act prohibits futures contracts on movie box
office receipts. Why? The producers of films face the same risk
as farmers and oil refiners. A bad showing at the theaters has
the same commercial impact as a failed crop or a dry drilling
There was a severe backlash when someone proposed the use of
derivatives to hedge against terrorist attacks. Yet, massive
economic losses resulted - perhaps the terrorists main
objective all along. Airlines went bankrupt as passengers
feared to fly. Merchants nearby were ruined or forced to move
to pricier locations. And the cost to national and local
governments was immense.
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