The derivative is a single instrument fusing insurance motives with betting motives.
Evidence
At the center of the speculative imagination is an instrument that binds together present and future, thought and action, the desire for stability and the openness to the unknown. From its inception, the derivative epitomized speculation’s inherent conflict, capturing both its investment and its insurance sides. A contract whose value is derived from the performance of an underlying entity (whether rice and hogs or interest rates and market indices), the derivative is capital’s security form. It aims to provide offsetting compensation (insurance) for an undesired event or, conversely, to take a bet on such an undesired event by speculating that the party seeking insurance will be wrong about the future value of the underlying asset. — Aris Komporozos-Athanasiou, Speculative Communities, 90
Categorization
- DEFINE: Defines the derivative structurally while stressing that it inherently fuses two opposed orientations: insurance and speculation.
- XREF: connects to: Derivatives are speculative techniques betting on future asset-price movements — Max Haiven, Cultures of Financialization, 153; Insurance and speculation share a structure of betting on contingent futures. — Aris Komporozos-Athanasiou, Speculative Communities: Living with…, 416; Speculation has always fused an insurance function with gambling on volatility. — Aris Komporozos-Athanasiou, Speculative Communities: Living With…, 52 (+3 more)
Broader Connections
- Derivatives are speculative techniques betting on future asset-price movements
#expands(0.95) — Max Haiven, Cultures of Financialization, 153 - Speculation has always fused an insurance function with gambling on volatility.
#corroborates(0.95) — Aris Komporozos-Athanasiou, Speculative Communities, 52 - Insurance and speculation share a structure of betting on contingent futures.
#corroborates(0.90) — Aris Komporozos-Athanasiou, Speculative Communities, 416 - Modern derivatives increase exposure to volatility to profit from it.
#expands(0.85) — Aris Komporozos-Athanasiou, Speculative Communities, 59 - Insurance and coordination-clue motives can be operationally distinguished by bidding tests.
#corroborates(0.75) — Thomas C. Schelling, The Strategy of Conflict, 871