Derivatives risks overstated, say academics

The majority of finance professors at the world’s top business schools believe the risks of using derivatives have been overstated, according to the International Swaps and Derivatives Association.

Isda polled academics at the world’s top 50 business schools as ranked by the Financial Times and found that 81% of respondents believe derivatives' risks have been overstated. It added that the need for better understanding of derivatives and their benefits among market participants was a common theme found in feedback by respondents.

Isda also said 98% of its respondents agreed that managing financial risk more effectively is a way for companies to build shareholder value.

“These findings show a clear consensus among the world's top finance academics that derivatives are extremely valuable risk management tools and offer a beneficial way of delivering shareholder value,” said Robert Pickel, Isda’s chief executive. “These experts believe, as we do, that the risks of using derivatives have been overstated and that they play a beneficial role in the global financial system.”