Subprime Crisis & Derivatives: Origins

by niccolo caldararo

The origins of the present subprime crisis can be found in the Nixon Administration when his appointment to the SEC, Mitchell, removed the prohibitions to trades in futures and similar "bets" that has made our markets so unstable.   A number of academics including Fisher Black, created a series of formulas by which traders could manipulate the markets and make huge profits. The result of this behavior would led to our crisis by creating the impression that risk could be eliminated.