ABSTRACT
The former chairman of the US central bank, Alan Greenspan's admission is symptomatic of a way of thinking about the world that is shared by many policymakers at the head of US financial institutions and has been promulgated by many academics in economics and finance. It includes those who have earned international awards for their work, such as the 'Prize of the Bank of Sweden in Economic Sciences in memory of Alfred Nobel', often abbreviated as the Nobel Prize in Economics. Certain members of Congress considered him a responsible party for the economic debacle. This classical model of the world is premised on the notion of self-correction: that is, any miscalculations by actors operating within the markets will be adjusted for by the markets. Derivatives, such as options to buy or sell certain securities at certain prices in the future, provided opportunities to hedge more efficiently than the previous traditional investment strategies.
