Mungkin tiada apa yang lebih menggambarkan keterlampauan sistem kapitalis yang tidak terkawal selain pasaran derivatif. Warren Buffett, salah seorang pelabur paling kaya di dunia dan ketua dana pelaburan Berkshire Hathaway bernilai $196 bilion, terkenal dengan menggambarkan derivatif sebagai "senjata pemusnah massa kewangan". Dalam laporan tahunan Berkshire Hathaway kepada para pemegang saham pada tahun 2002, beliau berkata, "Melainkan kontrak derivatif itu dijamin dengan cagaran atau jaminan, nilai akhirnya juga bergantung kepada kebolehpercayaan kredit pihak-pihak yang berurusan dengannya. Sementara itu, sebelum kontrak diselesaikan, pihak-pihak tersebut mencatatkan keuntungan dan kerugian, selalunya dalam jumlah yang sangat besar, dalam penyata pendapatan semasa mereka tanpa sesen pun berpindah tangan. Julat kontrak derivatif hanya dibatasi oleh imaginasi manusia (atau kadang-kadang, nampaknya, orang gila)". Buffett bercakap berdasarkan pengalaman langsung, setelah membeli sebuah syarikat insurans kecil di AS yang mempunyai portfolio derivatif dalam rekod-rekodnya. Selepas menyatakan keraguan terhadap penilaiannya yang nampaknya dinaikkan secara berlebihan, Buffett mengarahkan portfolio itu dilupuskan. Selepas beberapa juta dolar kerugian dan meredah lebih 670 hubungan pihak lawan (institusi di sebelah lain urus niaga), kerja itu akhirnya selesai.

Perhaps nothing characterises better the excesses of a capitalist system out of control than the Derivatives market. Warren Buffett one of the wealthiest investors in the world and doyen of Berkshire Hathaway’s $196 billion investment fund famously described derivatives as “financial weapons of mass destruction”. In Berkshire Hathaway's annual report to shareholders in 2002, he said, “Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counterparties to them. In the meantime, though, before a contract is settled, the counterparties record profits and losses - often huge in amount - in their current earnings statements without so much as a penny changing hands. The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen)”. Buffett was speaking from first hand experience having bought a small US Insurance company which had a derivatives portfolio on its books. After expressing scepticism over its seemingly inflated valuation, Buffett ordered the portfolio to be liquidated. After several million dollars of losses and wading through over 670 counterparty (the institution on the other side of the transaction) relationships the job was done.

Pasaran derivatif telah berkembang hampir secara eksponen sepanjang 10 tahun yang lalu dan kini dianggarkan bernilai antara $500 trilion dan $1,000 trilion (satu kuadrilion). Nilai ini jauh melebihi ekonomi "sebenar" yang dianggarkan berjumlah $50 trilion di seluruh dunia. Sebahagian besar pasaran derivatif tidak dikawal selia dan dicirikan oleh pasaran OTC (over the counter), yang secara efektif diurus oleh pihak-pihak yang terlibat dalam transaksi, kebanyakannya bank, firma pelaburan, dana lindung nilai (hedge fund) dan pelanggan mereka, termasuk badan perbandaran, majlis, dana pencen dan individu kaya. Menurut Bank for International Settlements, pada Disember 2007 pasaran OTC bernilai $596 trilion dari segi nilai notional. Derivatif pada hakikatnya ialah instrumen kewangan yang nilainya bergantung kepada nilai instrumen kewangan asas. Ia merupakan kontrak yang bergantung kepada prestasi atau pergerakan harga aset, bukan transaksi yang melibatkan aset sebenar itu sendiri, dan merangkumi komoditi, ekuiti, gadai janji, pinjaman hartanah, bon, kadar faedah, kadar pertukaran, atau indeks (indeks pasaran saham, indeks harga pengguna, dan sebagainya). Derivatif termasuk niaga hadapan (futures), kontrak hadapan (forwards), opsyen (options) dan pertukaran (swaps).

The derivatives market has grown almost exponentially over the past 10 years and is now estimated at between $500 trillion and $1,000 trillion (a quadrillion) in size. A level that dwarfs the “real” economy which is estimated at $50 trillion worldwide. Most of the derivatives market is un-regulated and is characterised by the OTC (over the counter) market which is effectively managed by contracting parties to the transactions, mostly banks, investment firms, hedge funds and their customers which include municipal bodies, councils, pension funds and wealthy individuals. According to the Bank for International Settlements as of December 2007 the OTC market was worth $596 trillion in notional value. Derivatives are in essence financial instruments whose value depends on the value of underlying financial instruments. They are contracts which depend on the performance or movement in prices of assets rather than transactions involving the actual assets themselves, and include commodities, equities, mortgages, real estate loans, bonds, interest rates, exchange rates, or indices (stock market indexes, consumer price index, etc.). Derivatives include futures, forwards, options and swaps.

Penggunaan utama derivatif yang dipublisitikan ialah untuk mengurangkan risiko. Namun pada hakikatnya, disebabkan oleh sifat derivatif yang dibangunkan dan keterputusannya daripada dunia sebenar, skala yang sangat besar, serta hakikat bahawa ia dipegang oleh begitu ramai institusi melalui hubungan pihak berkontrak yang kompleks, timbul persoalan sama ada derivatif ini mencapai sesuatu yang lain selain daripada cara yang sangat terancang untuk berjudi pada skala yang benar-benar membawa bencana. Untuk memperincikan transaksi-transaksi ini, tiga bentuk derivatif yang popular, iaitu CDO, Credit Default Swap dan Currency Swap, dibentangkan dalam Lampiran kertas kerja ini.

The main publicised use for derivatives is to reduce risk. But in fact due to the nature of the derivatives developed and their disconnect from the real world, their sheer scale, and the fact that they are held by such a multitude of institutions via complex counterparty relations, it is questionable as to whether they are achieving anything other than a highly tuned means to gamble on a simply catastrophic scale. To amplify on to the detail of these transactions three popular forms of derivatives; CDOs, Credit Default Swaps and Currency Swaps are presented in the Appendix of this paper.