Derivatives Law & Policy

Modern capital and financial markets rely on a wide variety of complex instruments, including Treasury securities, structured debt and equity instruments, and derivatives of various kinds. Public awareness regarding these instruments has grown since the Financial Crisis of 2008 because they are thought to have played an important role in both the rapid growth of financial markets (“financialization”) and their destabilization. These instruments and the role they play in modern markets are often not well understood. Yet a basic understanding of these instruments has now become important in modern financial law practice and any discussions on financial policy and regulation.

This course will review the workings of derivative instruments in the capital markets and how such instruments themselves are used. The relationship between banking and capital markets, and between government and the private markets, will be explored, as will the most important legal and fiduciary responsibilities involved. While not highly technical, the various principal types of derivatives will be examined. We will therefore also consider the numerous public policy issues relating to derivatives, their role in the Crisis of 2008, the history of attempts to regulate these instruments, and the current regulatory structure.