Derivatives: An explanation

Credit default swaps? They're complicated -- and scary! The receipt you get when you pre-order your Thanksgiving turkey? Not so much. But they have a lot in common: They're both derivatives. Senior Editor Paddy Hirsch explains.

About the author

Paddy Hirsch is a Senior Editor at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
Log in to post16 Comments


These videos are fantastic. I have become a real fan. You are able to explain previously confusing concepts so that I understand them--and are interested in them. Thanks a million. Susan

Cool video's about difficult subjects. And I like thw white board approach.


paddy, i enjoy your videos

Great presentation, unfortunately not very accurate.

Farmer does not have to pay money right away, just agree on the price of delivery (this leads to leverage and counter-party risk on both sides).

Hedge usually means taking opposite position (Farmer expect to cook (deliver) 20 turkeys for his family (short position) he agree to buy turkeys in the future (long position). When Farmer buys an option he is hedging one more time.

It's hard to condense so much information in a such a short period of time. Narrowing it down to a single point should help with accuracy.

The ability to explain complex concepts in such a simple, mundane way, is an example of a high-level intelligence. I'm so glad I heard a reference to this site on NPR today. We may have knowledge about these concepts, but we are learning how to explain them in a more effective and clear way. Thank you!

Wow, Paddy Hirsch, your presentations are so useful and informative. Thank you so much for these presentations.I can't imagine how much research I would have to do to acquire the knowledge base that you provide so effectively. A thousand thanks! :-) Oh, and now I'm a bit more capable of intelligently reading The Economist.

Carry trade in currency is a big phenomenon I am hearing from experts where the money is going with the falling dollar. Could you pls explain the carry trade in currency


With Generous Support From...