Research Article

Dividing Hedging and Gambling: Legal Implications of Derivative Instruments

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Abstract

The past three decades have seen the emergence in the market of many different types of “derivative instruments”, ranging from futures, forwards, options, and swaps 1 to some other hybrid instruments 2 or synthetic transactions 3 . Along with insurance, derivative instruments help market participants not only to hedge various types of risks but also to engage in market speculation. A derivative transaction could serve the purpose of avoiding large losses (i.e. hedging) as well as earning a windfall (i.e. speculation). As such, one question arises: Is there any difference between gambling and derivative trading?

Keywords: gambling, derivatives trading

How to Cite:

Chen, C., (2006) “Dividing Hedging and Gambling: Legal Implications of Derivative Instruments”, Opticon1826 1(1). doi: https://doi.org/10.5334/opt.010608