Seven Times When Financial Derivatives Teetered the World's Economy on the Brink of Ruin

Financial derivatives, complex financial instruments that derive their value from underlying assets, have been a focal point of global economics for decades. These instruments, including futures, options, and swaps, are designed to manage risk or speculate on the future price of an asset. However, when mismanaged or misunderstood, they can destabilize the world's economy. This slideshow will take you on a journey through seven critical moments in history when financial derivatives teetered the world's economy on the brink of ruin.

Black Monday, 1987

Our first stop is October 19, 1987, a day known as 'Black Monday.' On this day, stock markets around the world crashed, shedding a significant percentage of their value. At the heart of this crash was portfolio insurance, a financial derivative used to limit a portfolio's downside risk. However, as the markets started to fall, these derivatives triggered massive sell-offs, exacerbating the crash. This event served as a stark reminder of the potential dangers of financial derivatives when used irresponsibly.