OTC Derivatives and the Global Financial Crisis - Dissertation Example

This dissertation paper attempts to explore the extent to which derivatives can be considered to be one of the major factors that have led to the current problems in the global financial sector and look at what steps can be taken to prevent a crisis on this scale from happening again. This shall be based on a review of the available literature. OTC Derivatives and the Global Financial Crisis Table of Contents Abstract Page 2 Table of Contents Page 3 Chapter 1 Introduction Page 4 Chapter 2 Literature Review Page 6 Chapter 3 Research Methods Page 32 Chapter 4 Analysis and discussion of research findings Page 33 Chapter 5 Conclusions and recommendations Page 42 Chapter 1: Introduction Outline the project Aims and objectives Reason for choosing this The research methodology Any limitations of the research The main findings The onset of the Great Recession of 2008 was preceded by a slump in the housing market and a credit crunch that affected the entire economy of the United States.

The ensuing financial crisis acquired global dimensions though at first, it seemed that the US would be the hardest hit due to the crisis. Even though the US Congress passed the TARP or the Troubled Asset Relief Program to assist the banks worst hit by the crisis, the recession continued unabated. Further, the crisis itself was thought to have been brought about by a combination of factors that included poor regulatory oversight over the derivatives side of the banking business, predatory lending, and the ill effects of well-intentioned efforts to spread the risk associated with sub-prime lending across the financial system.

This paper looks at the role of derivative instruments and derivative securitization specifically in terms of the effect that they had on the financial system and how unchecked “gambling” by the banks led to “casino capitalism” and the resultant financial crisis that engulfed the entire economy and even other parts of the world.