3Wednesday, 24 September 2008The title of my talk in the program was “The Quest for Liquidity - Ensuring Liquidity through Derivatives”. This is a relatively broad topic and so I hope you
ll indulge my decision to approachit from first principles. A few of you might know me and a few of you might even have come across my blog at the Park Paradigm. If so, you
ll know that I am passionate about markets andin particular the power and utility of derivatives to help individuals, companies and economies to measure and manage risk, and to help optimize our society
s wealth.So it is with some anxiety and trepidation that I have been watching the current crisis unfurl. Clearly much of the behavior of the past few years was excessive, often egregious and - mostprobably - sometimes fraudulent. Equally clearly, a new regulatory and market framework is needed - not the least to rebuild trust in our markets and institutions. And yet as I read and listento the press and the politicians, it strikes me that we are running a risk of ultimately creating a much more lasting harm by focusing on the instruments and not on the underlying culture asthe cause of our current distress. At the risk of preaching to the converted, I
d like to re-make the case for derivatives, for the science of finance.