Derivatives Quote by Kenneth Arrow
“I am not really inclined to think there is any very effective regulation of the derivative securities markets that would be useful. People who go into it essentially ought to know what risks they're taking and I don't see any useful regulation.”
About This Quote
Source Interview: Economic Perspectives, 1995
Regulation of complex derivatives is limited; participants should understand risks themselves, making heavy rules often ineffective.
In simple terms: Derivatives are hard to regulate; knowledge is key.
Key Takeaway
Educate participants on risk.
Themes
finance
regulation
information asymmetry
Mood
critical
thoughtful
Type
analytical
philosophical
When to use this quote
- trading desks
- investment firms
- policy debates
Key Concepts
derivatives
market design
risk management
Questions to Reflect On
- What risks are participants unaware of?
- Can better disclosure replace regulation?
A Different Perspective
Regulation can still address systemic threats and market failures.
![“We [at Soros Fund Management] use options and more exotic derivatives sparingly. We try to catch new trends early and in later stages we try to catch trend reversals. Therefore, we tend to stabilize rather than destabilize the market. We are not doing this as a public service. It is our style of…” quote by George Soros](https://sms4smile.com/quotes/img-quotes/f33/george-soros-1593_customer_we-at-soros-fund-management-use-options_113322.jpg)
