ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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In Defence of Complexity

That complex financial derivatives lay at the root of the financial crisis is a seductive but wrong idea. When liabilities are complex assets cannot be simple, otherwise we will have a mismatch between the two. The problem is not with the nature of derivatives but of the incentives. Financial regulators need to concentrate on incentives that reduce the build-up of lending in a boom, irrespective of the precise instrument of leverage.

HT PAREKH FINANCE COLUMN

of money as the price fell below Rs 200. Per-

In Defence of Complexity

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