Zero Sum Market

A reference to the fact that derivatives markets reallocate uncertain cash flows among market participants without enhancing aggregate cash flow in any way and actually reducing the cash flow by the amount of transaction costs in the market. This viewpoint neglects the reallocation of utility among market participants. It also ignores the opportunity that market participants have to transact at lower costs than they might be able to obtain in traditional markets. Derivative markets also offer the opportunity to implement forecasts which might not be expressed readily in traditional securities positions.

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