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Analyze the complexities of the derivative markets and how the reporting of derivatives may be deceiving...

Analyze the complexities of the derivative markets and how the reporting of derivatives may be deceiving to investors. Suggest at least one way to improve the method of valuing derivatives so that the reporting becomes more transparent for investors.

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Answer #1

Derivatives are highly complex instruments because they do not have their own value and they keep on deriving their value from the underlying Assets and derivation of those values are very complex as they are dependent on specific formulas which will include a whole lot of new terms and techniques.

Reporting of derivatives would be deceiving to various investors because they are not valued on mark to market basis and de can be manipulated and the valuation can be window dressed.

One way of reporting of correct derivative would be reporting them on the basis of Mark to market because that would mean that investor would gain the appropriate idea about the actual position of various companies on derivatives.

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