Explain How Derivates Were Used to Increase Risk Making the Financial

question 163

Essay

Explain how derivates were used to increase risk making the financial crisis of 2007-2009 more severe.

---

Definitions:

Recognised Asset

An item of economic value that is accounted for and reported on a company's financial statements, meeting specific recognition criteria.

Foreign Exchange Gain

Profit from favourable changes in exchange rates affecting the value of currency positions.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time, often reported on the income statement.

Relevant Exchange Rates

The appropriate exchange rates used in the conversion of foreign currency transactions into the functional currency for reporting purposes.