The SMOK RPM C is a highly versatile and advanced pod mod system that offers an exceptional vaping experience. Combining power, performance, and portability, this device has become a favorite among vapers worldwide. In this comprehensive guide, we will delve into the various features, functions, and settings of the SMOK RPM C, providing you with the knowledge needed to maximize your vaping experience. Whether you're a beginner or an experienced vaper, this guide will equip you with the necessary information to make the most of this innovative device.

Getting Started with the SMOK RPM C

Unboxing and Contents

Upon unboxing the SMOK RPM C, you will find the main device, a refillable pod cartridge, RPM and NORD coil options, a USB charging cable, and a user manual. Ensure that all the components are included and undamaged before proceeding.

Device Overview
The SMOK RPM C features a compact and ergonomic design, making it comfortable to hold and easy to carry. It has a single fire button and a 0.96-inch color screen for convenient operation and data display. On the side of the device, you'll find a USB port for charging purposes. The pod cartridge is magnetically attached to the device, ensuring a secure connection. The RPM C also boasts a powerful built-in battery that delivers long-lasting vaping sessions.

Operating the SMOK RPM C

Filling the Pod Cartridge

To fill the pod cartridge, remove it from the device by gently pulling it out. Locate the fill port on the side of the pod and lift the rubber plug. Insert the tip of your e-liquid bottle into the fill port and gently squeeze to fill. Once filled, replace the rubber plug and firmly reattach the pod to the device.

Installing and Changing Coils

The SMOK RPM C is compatible with both RPM and NORD coils, offering a wide range of vaping options. To install or change a coil, first, remove the pod from the device. Next, detach the coil by unscrewing it counterclockwise from the bottom of the pod. Take a new coil and prime it by applying a few drops of e-liquid onto the cotton wick. Then, screw the coil firmly into the base of the pod. Reinsert the pod into the device, ensuring a secure fit.

Adjusting Settings and Modes

The SMOK RPM C offers various settings and modes to customize your vaping experience. To access the menu, press the fire button three times rapidly. Use the up and down buttons to navigate through the options and the fire button to confirm your selection. The device allows you to adjust wattage, display colors, and choose between puff-based or time-based vaping data. Experiment with different settings to find your preferred vaping style.

Safety and Maintenance

Battery Safety

To ensure safe usage, always follow these battery safety guidelines:

Use the provided USB cable or a reputable charging device.
Avoid exposing the device to extreme temperatures or moisture.
Do SMOK RPM C not leave the device unattended while charging.
Replace the battery if damaged or if performance deteriorates.

Cleaning and Maintenance

Regular maintenance will prolong the lifespan of your SMOK RPM C. Clean the device and pod connections with a dry cloth to remove any e-liquid residue. Avoid using water or other liquids to clean the device. Additionally, periodically inspect the pod for wear and tear, replacing it if necessary. Keep the device stored in a cool and dry place when not in use.

Conclusion

The SMOK RPM C is a top-of-the-line pod mod system that offers exceptional performance, versatility, and convenience. By following this comprehensive guide, you now have a solid understanding of the device's features, functions, and maintenance requirements. Remember to always prioritize safety when using your RPM C and adhere to the manufacturer's guidelines. Enjoy your vaping journey with the SMOK RPM C, and explore the various options and settings to find the perfect vaping experience for you.

Vape juice, also known as e-liquid or e-juice, is a vital component of electronic cigarettes or vaping devices. It is the liquid that gets heated and vaporized, producing the inhalable aerosol that users inhale. Vape juice comes in a wide variety of flavors, nicotine strengths, and compositions, allowing vapers to customize their vaping experience. In this guide, we will delve into the different aspects of vape juice, including its ingredients, flavors, nicotine levels, PG/VG ratios, and safety considerations.

Ingredients

Vape juice typically consists of four main ingredients: propylene glycol (PG), vegetable glycerin (VG), flavorings, and nicotine (optional). PG and VG serve as the base liquids, providing the foundation for the e-liquid. PG is a clear, odorless liquid that carries flavors well, while VG is a thicker, sweeter liquid that produces denser vapor clouds. The flavorings used in vape juice can be natural or artificial, offering a vast range of options such as fruity, dessert, or tobacco flavors. Nicotine, although optional, can be added in various strengths for those who desire it.

Flavors

The wide variety of flavors available in vape juice is one of the main reasons why vaping has become popular. Whether you prefer traditional tobacco flavors, sweet desserts, refreshing fruits, or even beverages, there is a flavor to suit every taste. Vape juice flavors can be categorized into several groups, including tobacco, menthol, fruit, dessert, candy, and beverage. Experimenting with different flavors is part of the fun in vaping, allowing users to discover their personal favorites.

Nicotine Levels

Nicotine is an addictive substance found in tobacco, and it can be added to vape juice in different strengths to accommodate individual preferences. Nicotine levels in vape juice are usually measured in milligrams per milliliter (mg/mL). Common nicotine strengths range from 0mg/mL for those who want a nicotine-free experience, to 3mg/mL, 6mg/mL, 12mg/mL, 18mg/mL, and even higher for heavier smokers or vapers. It is important to choose a nicotine strength that matches your nicotine dependence level or gradually decrease it if you wish to reduce your nicotine intake.

PG/VG Ratios

The ratio of propylene glycol (PG) to vegetable glycerin (VG) in vape juice can significantly affect the vaping experience. Different PG/VG ratios offer distinct characteristics in terms of throat hit, vapor production, vape juice online and flavor intensity. A higher PG ratio, such as 70/30 or 60/40, provides a stronger throat hit and better flavor representation but produces less vapor. On the other hand, a higher VG ratio, such as 70/30 or 80/20, produces denser vapor clouds but may sacrifice a bit of throat hit and flavor. It is a matter of personal preference to find the right balance that suits your vaping style.

Safety Considerations

While vaping is generally considered safer than smoking traditional cigarettes, it is still essential to prioritize safety when using vape juice. Here are some key safety considerations:

Purchase from reputable sources:
Only buy vape juice from trusted manufacturers and retailers to ensure the quality and safety of the product.

Check for childproof packaging:
Vape juice bottles should have child-resistant caps to prevent accidental ingestion by children or pets.

Store properly:
Keep vape juice out of reach of children and pets, and store it in a cool, dry place away from direct sunlight.

Avoid DIY vape juice:
While some vapers enjoy making their own e-liquids, it requires expertise and knowledge to ensure proper mixing and safety. It is generally recommended to purchase pre-made vape juice from reputable sources.

Be mindful of allergies:
Some individuals may have allergies or sensitivities to specific ingredients in vape juice, such as propylene glycol or certain flavorings. If you experience any adverse reactions, discontinue use and consult a healthcare professional.

Maintain your device:
Regularly clean and maintain your vaping device to ensure optimal performance and minimize the risk of leaks or malfunctions. Follow the manufacturer's instructions for cleaning and maintenance.

Keep liquids separate:
Store vape juice away from other household liquids, such as cleaning products or medications, to avoid accidental mixing or ingestion.

Educate yourself:
Stay informed about current research and updates regarding vaping and vape juice safety. Be aware of any potential risks associated with certain ingredients or practices.

Vape responsibly:
While vaping can be an enjoyable activity, it is important to use it responsibly. Follow any regulations or restrictions in your area, and respect the rights of those around you by vaping in designated areas or asking for permission when in public spaces.

Conclusion

Vape juice plays a crucial role in the vaping experience, offering a wide range of flavors, nicotine levels, and PG/VG ratios to cater to individual preferences. Understanding the ingredients, flavors, nicotine strengths, PG/VG ratios, and safety considerations associated with vape juice is essential for vapers to make informed choices and enjoy vaping responsibly. By following safety guidelines, purchasing from reputable sources, and staying informed, vapers can have a satisfying and enjoyable vaping experience while prioritizing their well-being.

Looking to dive deeper into your sewing obsession? These sewing blogs are some of our all-time faves, and many of the faces behind ’em teach classes on Craftsy — meaning you can gain extra knowledge and get those creative juices flowing for your next project.

Oonaballoona
Marcy Harriell — aka Oona from Oonaballoona — is the one to follow whenever you feel like you’ve hit an outfit slump. She transforms ho-hum outfits into major show-stoppers in her Craftsy series Re:Fashion, while her blog offers up ideas for unique fabric combinations and beautiful trims.

The Palmer/Pletsch Blog
When you want to pick up additional skills, the Palmer/Pletsch Blog is here to help. Run by Pati Palmer and Melissa Watson, these ladies are all about perfecting fitting and tailoring techniques so you can rock your wardrobe in style.

The Crafty Gemini
You may know Vanessa Vargas Wilson as the instructor of our Pulsing Prism Afghan class, but she shows off even more of her skills on her blog The Crafty Gemini. There you can find tutorials for garments, tips for beginner sewists and even reviews of different sewing machines. And if your interests go beyond sewing, she has content for everything from baking and paper crafts to woodworking.

Sew Liberated
A while back, Meg McElwee decided to focus on her family and sewing with conscious intention. While her posts on Sew Liberated are, of course, sewing-related, they’re also infused with thoughts about cherishing your body, being at peace with your clothes and the power of a homemade wardrobe .

Whipstitch
Whipstitch is run by Atlanta-based patternmaker, author, teacher and blogger Deborah Moebes. Along with designing garment patterns for both kids and adults, she creates quilt patterns, writes books and teaches classes. She also created the Murder Mystery Quilt, a subscription where you quilt to find clues and solve a mystery story.

Mister Domestic
Trust us, you won’t regret joining Mister Domestic‘s fabric party. While his blog content is primarily quilt-focused, he also has sewing tutorials for hats and bags, as well as some embroidery and crochet projects. Talk about a jack of all trades!

Tilly and the Buttons
London-based patternmaker and author Tilly Walnes, tina givens known on the web as Tilly & The Buttons, found her first taste of success on the popular television show, The Great British Sewing Bee. Jumping from the show’s exposure, she has since built a mini empire with in-person and online classes, patterns, books and a blog filled with tutorials and project inspo.

Orange Lingerie
As more people get into sewing their own bras and undergarments, finding quality resources is insanely helpful. Which is where Norma Loehr of the blog and indie pattern line Orange Lingerie comes in — she gives both the new and the experienced bra maker inspiration and guidance through her tutorials, patterns and books.

Mimi G Style
Mimi G can be seen engaging in friendly competition in our Craftsy series He Sewed, She Sewed, which she co-hosts with husband Norris Dánta Ford. When she’s not sewing up stylish outfits, she’s running her award-winning fashion and DIY blog. There she posts tutorials and outfit inspo that’s sure to captivate any creative sewer.

Male Pattern Boldness
Peter Lappin is the sewing fanatic behind Male Pattern Boldness, where he talks men’s fashion, fabric, sewing and more. He posts detailed tutorials for anything you might need to gift the male friend in your life. Shirts, pants, boxers — you name it, it’s likely he’s got it.

Sew Sweetness
If bag making is your thing, then the Sew Sweetness blog is for you. Sara Lawson is an author, pattern designer and sewist extraordinaire. While she certainly sews more than just bags, that is her area of expertise — on her blog you can learn to sew, line and interface everything from totes to coin purses.

Made by Rae
Rae Hoekstra, the designer behind indie pattern company Made by Rae, sews for both adults and kids, meaning her blog is packed full of tutorials. She also ventures into home accessories, toys and gifts, and her sincere kindness makes her blog a lovely place to spend some quality time.

Carolyn Friedlander
A former architect turned fabric and quilt designer, Carolyn Friedlander’s blog is filled with b-e-a-utiful projects drawn from elements of art and architecture. Her designs are modern and filled with bold colors and crisp lines, making it incredibly easy to fall in love with the site.

Cashmerette
Sewist Jenny Rushmore founded Cashmerette to share her inspirations, tips and sew-alongs while celebrating the fabulous curvy sewers of the world. She believes that confidence is achieved by changing your clothes to fit your body — not the other way around — and helps others learn the skills they need to make that happen.

Ada Spragg
Some blogs are chock-full of skills, techniques and tutorials, while others are also full of pure eye candy. Ada Spragg is one such blog, as Sophie, the mastermind behind it, sews up glamorous, architectural and interesting garments that will undoubtedly get your mind going with ideas on how to craft a closet that screams you.

A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated Derivatives products cinema with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.

A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, Produits dérivés mangas AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.