What are death derivatives?
Well if you think your broker hid something from you….well you are partially hide! Also when your broker did not tell you that dealing in derivatives will lead to a quick death…well that is also partially true!
The problem is Death Derivatives are something new – and both the above statements are not true for death derivatives!
Thanks to improved health services and general good health, people are living longer. Much longer than what their financial planners told them to provide for. Now each passing year puts a big burden on the pension providers – sometimes as high as 4% p.a. So the insurance companies need some self funding products that will take care of this problem.
So the usual big names (yes you guessed right! J P Morgan, Goldman Sachs, etc. – the same guys who took us to the cleaners in 2008) have set up Death Derivatives.
Read here for greater details on how Death derivatives work…it is interesting and amusing!
http://moneymorning.com/2011/05/24/death-derivatives-wall-streets-latest-ill-advised-maneuver/
shashank
Subra i am new to this blog and as i came across one of your article…It was interistingly informatative !!!
So now this Death derivative is another addition to my concept of derivatives…. Last time i was amused after reading about WHETHER DERIATIVES… anyway thanks for posting this new concept !!!
Muthu
Very informative. This means if people live long, and if investors and death derivatives start loosing, wall street may even have a tie up with mafia to eliminate long livers and may load that cost too in pricing the ‘death bond’.
I think it is futile to start expecting Wall Street to behave better. For easy money, they would be willing to sell anything which they can convince the investors to buy.
This leads to one fundamental question. Are derivatives required at all? With lot of disadvantages and very few advantages, do we really need thes ‘financial instruments’?