A Legislation on Derivative Products: The Chicago Board of Trade

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1. SUMMARY: . Derivatives are able to eliminate unexpected risks arising from the price volatility of an asset, however they have often been implicated in the most controversial organisational meltdowns and financial crises. The evolution underlying assets in derivative products have pushed the development of legislation to support these changes. The Chicago Board of Trade was the first centralised derivative trading market, since then the United States regulation on derivatives have served as a basis from other countries when regulating their markets. The research wants to evaluate the impact that the changes in the underlying instrument had on regulation. A historiography as a research methodology is proposed, were a historiographical…show more content…
In this research proposal we will initially begin with a background to the subject where we will build up a basis to the research problem. An outline of the proposed research question and the research objectives will be conducted. The Literature studies will serve as a framework for the construction of the measuring instrument. 3. Background The first logic of a derivative occurred in the Middle East, 2000 BC, were signs of an option contract were a document was drawn authorizing the bearer to receive in fifteen days set weight of lead deposited with the priestesses of the temple (Einzing, 1970). A more familiar derivative is that in the book of Genesis 29 in the Old Testament, 1700 BC, where Jacob bought an option to marry Rachel after seven years of labour (Chance, 1998), since then with the development of regulation and markets for this financial product aided dearly to its popularity. In 1792 to 1750 BC era we found emergence of a put option contract in the Code of Hammurabi, were in the 48th law were farmers who had mortgages had to pay interest if they had good harvest but were not obligated to do so when harvests were bad (Riederova & Ruzickova, 2011). 1400 BC saw the emergence of commercial contracts in Ancient Mesopotamia. Records were engraved on clay tablets arranging the future delivery of a commodity as stipulated on the

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