Dividing Hedging and Gambling: Legal Implications of Derivative Instruments

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.

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Chaeo-hung Chen (UCL)

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