Undergraduate Publication:
Weapons of Mass Destruction: OTC Derivatives and the 2008 Financial Crisis

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dc.contributor.advisorRath, Michael
dc.contributor.authorCoker, Jesse
dc.date.accessioned2015-06-01T23:04:14Z
dc.date.accessioned2015-08-24T19:53:30Z
dc.date.accessioned2021-04-14T14:30:01Z
dc.date.available2015-06-01T23:04:14Z
dc.date.available2015-08-24T19:53:30Z
dc.date.available2021-04-14T14:30:01Z
dc.date.issued2015
dc.date.manuscript2015
dc.description.abstractIn 2002, Warren Buffet included a warning in his annual letter to the shareholders of Berkshire Hathaway which now seems eerily prophetic: “We view [derivatives] as time bombs, [as] financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal” (12, 14). These hidden dangers were painfully revealed in 2008 and 2009, when the ballooning housing, stock, and mortgage-backed security markets imploded simultaneously, bringing about the worst domestic recession since the Great Depression (“Financial Crisis Response”). Measured from 2006-2009, the “credit crisis” increased unemployment from 4.6% to over 10%, reduced US stock market capitalization by almost $5 trillion, decreased real gross private investment by a staggering 31.42%, and resulted in the federal government doling out over $1.1 trillion of aid to prevent the failure of well-established corporations including AIG, JPMorgan Chase, General Motors, and the GSEs Fannie Mae and Freddie Mac (Kolb 261-269). Unraveling the complex series of events that created the financial crisis remains challenging, since “no single cause [of the crisis] can be identified” (Kolb xi). However, one factor lies at the center of this web of causality: over-the-counter, mortgage-backed derivatives. The 2008 financial crisis clearly illustrates how the unregulated over-the-counter (OTC) derivatives market has the inherent tendency and capacity to create securities capable of toppling financial markets.en_US
dc.description.undergraduateundergraduate
dc.identifier.urihttps://hdl.handle.net/11244.46/35
dc.languageen_USen_US
dc.rightsCopyright (c) 2015, The Honors Undergraduate Research Journal, The University of Oklahoma. All rights revert to authors.
dc.rights.urihttp://creativecommons.org/licenses/by-nc-sa/4.0/
dc.subjectUndergraduate Researchen_US
dc.titleWeapons of Mass Destruction: OTC Derivatives and the 2008 Financial Crisisen_US
dspace.entity.typeUndPublication
ou.groupJoe C. and Carole Kerr McClendon Honors Collegeen_US

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