NEW YORK (
TheStreet) -- One Ivy League professor has an interesting idea for
Derivatives have been a keystone of the financial reform debate, and with good reason. Some types of derivatives were "synthetic" bets that
|Cornell professor Robert Hockett|
By and large, those nuances have been lost on taxpayers and their politicians, furthering the divide between Main Street and Wall Street. People hear credit default swap, and think
But Robert Hockett, an expert in financial law and economics at Cornell Law School, can envision a day when Joe the Plumber buys a structured investment vehicle to prepare for a time when broken toilets are few and far between."We have derivative contracts and synthetic derivatives engineered to enable people with financial sophistication to hedge against financial loss," says Hockett. "Well, if you worry about possible fluctuations in the price of your house, what if we developed derivative products so that people who lived in certain areas could hedge against loss in their houses? Or if you are in a particular occupation - a lawyer, say - and let's say incomes of lawyers wax and wane. What if we could come up with a financial instrument that would enable these lawyers to hedge against changes in their lawyerly incomes in certain areas or times of year or whatever?" Hockett's view is atypical and perhaps slightly controversial. He acknowledges that it isn't likely to happen any time soon, saying we must first put in place "a sane system of financial regulation," and better educate the public about finance and economics.
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