5 Simple Statements About Pre-Shave Explained

Shaving is a grooming ritual that has transcended generations and cultures, evolving from the rudimentary tools of yesteryears to the sophisticated razors of today. Amidst the sea of options available in the modern shaving landscape, the double edge safety razor stands as a timeless and iconic choice, embodying a blend of tradition, craftsmanship, and practicality. In this discourse, we delve into the intricate world of double edge safety razors, exploring their history, mechanics, benefits, and enduring allure.

History and Evolution

The journey of the double edge safety razor dates back to the late 19th century, an era characterized by a quest for innovation in personal grooming. Prior to its inception, shaving tools were often cumbersome and fraught with peril, leading to frequent nicks, cuts, and skin irritation. It was King C. Gillette who revolutionized the shaving landscape with his patent for a safety razor in 1904, introducing the concept of disposable blades that could be inserted into a reusable handle. This innovation not only simplified shaving but also made it safer and more accessible.

The original double edge safety razor featured a single blade with two sharp edges, hence the name "double edge." The design allowed users to switch between the two edges as one side dulled, offering a longer-lasting shaving experience. Over time, the design evolved, incorporating adjustable settings for blade exposure and angle, catering to individual preferences and facial hair types. Manufacturers like Merkur, Edwin Jagger, and Parker have continued to refine the design, merging modern precision engineering with classic aesthetics.

Mechanics and Design

The double edge safety razor is characterized by its elegant simplicity. The razor typically consists of three main components: the handle, the head, and the blade. The handle is often made from various materials such as stainless steel, brass, or even exotic woods, contributing to the razor's weight and balance. The head holds the blade securely and maintains the correct shaving angle, preventing excessive pressure and reducing the risk of irritation.

One of the defining features of double edge safety razors is the use of a single, double-edged razor blade. Unlike multi-blade cartridges that have become ubiquitous in modern shaving, the single blade provides a closer and cleaner shave while minimizing the potential for ingrown hairs and irritation. This is particularly beneficial for individuals with sensitive skin prone to razor burn.

Benefits and Appeal

The resurgence of interest in double edge safety razors in recent years is a testament to their enduring appeal. Here are some of the key benefits that have contributed to their popularity:

Economical: Double edge safety razors offer a cost-effective alternative to multi-blade cartridges. While the initial investment in a quality razor might be higher, the long-term savings from using inexpensive razor blades quickly accumulate.

Sustainable: In a world increasingly conscious of environmental impact, the disposable nature of multi-blade cartridges has raised concerns. Double edge safety razors produce significantly less waste as only the thin, recyclable razor blades need replacing.

Quality of Shave: The single blade design of double edge safety razors allows for a closer and more precise shave. This results in reduced irritation and ingrown hairs, making it an ideal choice for those with sensitive skin.

Traditional Experience: Shaving with a double edge safety razor evokes a sense of tradition and craftsmanship. The weight and balance of the razor, along with the need for proper technique, provide a tactile and engaging experience.

Customization: Many double edge safety razors feature adjustable settings, allowing users to tailor the blade exposure and angle to their specific needs. This flexibility is especially useful for individuals with varying facial hair textures.

Connection to History: Using a double edge safety razor connects users to a bygone era of grooming. It's an homage to a time when shaving was a deliberate and methodical act, rather than a hurried daily routine.

Aesthetics: The intricate designs, premium materials, and polished finishes of double edge safety razors make them aesthetically pleasing objects. Displayed on Best Badger Shaving Brushes a bathroom counter, they exude an air of refinement.

Shaving Technique and Learning Curve

While the benefits of double edge safety razors are clear, it's important to acknowledge that they require a degree of skill and technique. Shaving with these razors demands a gentle touch, proper angle, and slower, deliberate strokes. The learning curve can be intimidating for those accustomed to the ease of multi-blade cartridges. However, the investment in time and practice is rewarded with an unparalleled shaving experience.

Conclusion

The double edge safety razor, with its rich history, elegant design, and myriad benefits, stands as a steadfast choice in the ever-evolving landscape of shaving tools. Beyond its practical utility, it embodies a philosophy of craftsmanship, sustainability, and connection to the past. As the world continues to place value on authenticity and quality, the timeless appeal of the double edge safety razor is destined to endure, serving as a reminder that sometimes, the old ways are indeed the best ways.

hankerchiefs Fundamentals Explained

When it comes to men's fashion, accessories play a significant role in creating a polished and stylish look. One accessory that can add a touch of sophistication and elegance to any outfit is the extra long tie. Extra long ties are perfect for tall individuals or those who prefer a more modern and trendy look. In this guide, we will explore everything you need to know about extra long ties, including their benefits, how to choose the right length, styling tips, and more.

Benefits of Extra Long Ties:

Extra long ties offer several advantages over their standard-length counterparts. Firstly, they are designed specifically for taller individuals, ensuring that the tie hangs at an appropriate length. This prevents the tie from looking too short or awkwardly proportioned when worn. Additionally, extra long ties provide a sleek and modern aesthetic that can enhance any outfit. They offer a unique opportunity for self-expression and can add an element of personality to your ensemble. Whether you're attending a formal event or heading to the office, an extra long tie can elevate your overall look.

Choosing the Right Length:

Selecting the correct length for your extra long tie is crucial to ensure a proper fit and a polished appearance. As a general guideline, the tip of the tie should reach just above your waistband or belt buckle. This length provides a balanced and proportional look, regardless of your height. To determine the ideal length for you, it's recommended to try on different sizes and experiment with various lengths in front of a mirror. Remember that everyone's body proportions are unique, so what works for one person may not work for another.

Materials and Patterns:

Extra long ties come in a wide range of materials and patterns, allowing you to choose the one that best complements your style and occasion. Common materials for ties include silk, polyester, cotton, and wool. Silk ties are a popular choice due to their luxurious feel and elegant drape. Polyester ties offer durability and are often more affordable. Cotton and wool ties are great options for colder seasons as they provide warmth and texture. When it comes to patterns, classic choices include solid colors, stripes, and polka dots. However, don't be afraid to experiment with more daring patterns and prints to showcase your individuality.

Styling Tips:

Now that you have your extra long tie, let's explore some styling tips to help you make the most of this fashionable accessory:

Suit and Shirt Pairing:

When wearing an extra long tie, it's essential to consider the color and pattern of your suit and shirt. Opt for complementary or contrasting colors to create visual interest. For example, pair a navy blue suit with a light blue shirt and a red extra long tie for a sophisticated look.

Knot Selection:

The type of knot you choose can significantly impact the appearance of your tie. A full Windsor knot or a half Windsor knot works well with extra long ties, as they create a larger knot that complements the length. Experiment with different knot styles to find the one that suits your personal style and the thickness of your tie.

Proper Length Adjustment:

Adjusting the length of your tie is crucial for a neat and professional appearance. Make sure the tip of the tie falls at the correct length, just above your waistband or belt buckle. Avoid letting the tie hang too low or too high, as it can disrupt the balance of your outfit.

Tie Bar or Tie Pin:

Consider using a tie bar or tie pin to keep your extra long tie in place. These accessories not only add a touch of sophistication but also prevent your tie from swinging or getting in your way during the day. Choose a tie bar or pin that complements the overall look of your outfit.

Experiment with Textures:

Extra long ties provide an excellent opportunity to experiment with different textures. Consider pairing a textured tie with a smooth shirt or vice versa to add depth 70 inch neckties and visual interest to your ensemble. Mix and match textures to create a visually appealing outfit.

Care and Maintenance:

To keep your extra long tie looking its best, proper care and maintenance are essential. Here are some tips to ensure your tie remains in excellent condition:

Untie with Care:

When removing your tie, always untie it gently to avoid damaging the fabric. Pulling on the narrow end of the tie can cause wrinkles, creases, or even permanent damage.

Spot Cleaning:

If you spill something on your tie, it's crucial to act quickly. Use a clean cloth or paper towel to blot the stain gently. Avoid rubbing the fabric, as it can spread the stain or damage the tie. For stubborn stains, consider taking your tie to a professional cleaner.

Storage:

Proper storage is vital to prevent your extra long tie from becoming wrinkled or damaged. Hang your ties on a tie rack or roll them loosely and store them in a tie case. Avoid folding them tightly, as it can leave creases that are difficult to remove.

Steaming:

If your tie becomes wrinkled, use a handheld steamer to gently remove the wrinkles. Hold the steamer a few inches away from the tie and allow the steam to relax the fabric. Avoid pressing the steamer directly onto the tie, as it can damage the material.

Conclusion:

Extra long ties are a stylish and practical accessory for tall individuals or those who prefer a contemporary look. By choosing the right length, experimenting with materials and patterns, and following the styling tips provided, you can create a polished and sophisticated outfit. Remember to care for your extra long ties properly to maintain their quality and longevity. With this guide in hand, you'll be well-equipped to incorporate extra long ties into your wardrobe and elevate your style to new heights.

How Top vape mods can Save You Time, Stress, and Money.

As the popularity of vaping continues to grow, more and more individuals are considering it as an alternative to traditional smoking. For beginners, choosing the right vape kit can be overwhelming due to the wide variety of options available online. This guide aims to provide a comprehensive overview of starter vape kits, outlining the key components, factors to consider, and some popular options available online. By the end of this guide, you'll be well-equipped to make an informed decision and embark on your vaping journey.

Understanding Starter Vape Kits:

Starter vape kits are designed specifically for beginners who are new to vaping. These kits typically include everything you need to get started, ensuring a hassle-free vaping experience. A typical starter kit consists of a battery (mod), a tank or atomizer, coils, a charger, and sometimes even e-liquid. It's important to note that while starter kits are beginner-friendly, they can also be suitable for experienced vapers looking for a compact and convenient setup.

Factors to Consider When Choosing a Starter Vape Kit:
Before diving into the online world of starter vape kits, there are a few important factors to consider to ensure you make the right choice:

Budget:

Determining your budget is a crucial step in choosing a starter vape kit. Prices can vary significantly, ranging from budget-friendly options to more high-end kits. Decide how much you are willing to invest, keeping in mind that higher-priced kits often offer better performance and additional features.

Vaping Style:

Consider your preferred vaping style when selecting a starter kit. Are you looking for direct-to-lung (DTL) vaping, which offers bigger clouds and more airflow, or mouth-to-lung (MTL) vaping, which simulates the sensation of smoking cigarettes? Understanding your vaping style will help you choose a kit that suits your preferences.

Ease of Use:

As a beginner, it's important to choose a starter vape kit that is easy to use and assemble. Look for kits with user-friendly features like one-button operation, easy coil replacements, and clear instructions.

Battery Life and Capacity:

Consider the battery life and capacity of the starter kit you're interested in. A longer battery life will ensure your device lasts throughout the day without the need for frequent recharging. Similarly, a larger tank capacity means you won't have to refill your e-liquid as often.

Popular Starter Vape Kits Online:

Now that we have covered the essential factors to consider, let's explore some popular starter vape kits available online:

Vaporesso Luxe PM40:

The Vaporesso Luxe PM40 is a compact and stylish starter kit that offers a powerful performance. It features a built-in 1800mAh battery, a 4ml e-liquid capacity, and adjustable wattage settings. The Luxe PM40 utilizes replaceable GTX coils and is compatible with both DTL and MTL vaping styles. Its user-friendly interface, fast charging capabilities, and ergonomic design make it an excellent choice for beginners.

Voopoo Drag X Plus:

The Voopoo Drag X Plus is a versatile starter kit that combines style and performance. It boasts a 5.5ml e-liquid capacity, an external 18650 battery, and a maximum power output of 100W. The Drag X Plus features Voopoo's innovative GENE.FAN 2.0 chip, offering fast firing speeds and advanced safety features. With its adjustable airflow system and compatibility with various coils, the Drag X Plus caters to both DTL and MTL vaping preferences.

GeekVape Aegis Mini:

The GeekVape Aegis Mini is a rugged and durable starter kit that is built to withstand the rigors of daily use. It features an internal 2200mAh battery, a 2ml tank capacity, and a maximum power output of 80W. The Aegis Mini is waterproof, dustproof, and shockproof, making it an ideal choice for vapers who lead an active lifestyle. It supports both DTL and MTL vaping and offers a range of coil options to suit individual preferences.

Where to Buy Starter Vape Kits Online:

When purchasing a starter vape kit online, it's important to choose a reputable and reliable vendor. Here are a few popular online platforms that offer a wide selection of starter vape kits:

Element Vape:

Element Vape is a well-established online retailer that offers a vast range of vape products, including starter kits. They provide detailed product descriptions, customer reviews, and competitive pricing, making it a reliable best disposable vape made in usa choice for purchasing a starter vape kit.

VaporDNA:

VaporDNA is a reputable online vape shop known for its extensive selection of products, competitive prices, and excellent customer service. They offer a wide variety of starter vape kits from various brands, ensuring you'll find the perfect fit for your vaping needs.

DirectVapor:

DirectVapor is a trusted online vape store that prides itself on providing authentic products at competitive prices. They offer a diverse range of starter vape kits, and their website features useful filters to help you narrow down your options based on your preferences.

Conclusion:

Choosing the right starter vape kit online is an important step in your vaping journey. By considering factors such as budget, vaping style, ease of use, and battery life, you can make an informed decision. Additionally, exploring popular options like the Vaporesso Luxe PM40, Voopoo Drag X Plus, and GeekVape Aegis Mini can help you find the perfect kit. Remember to purchase from reputable online platforms like Element Vape, VaporDNA, and DirectVapor to ensure you receive genuine products and quality customer service. Embrace this guide as your roadmap to selecting a starter vape kit that suits your needs and preferences, and enjoy your vaping experience responsibly.

How Much You Need To Expect You'll Pay For A Good Produit dérivé bd





A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges Produits dérivés série to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.

Not known Details About Produit dérivé séries





A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren derivative product gamer Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15