Chapter 10: Business Ethics, Social Responsibility, and Environmental Sustainability.
 and Chapter 11: Global and International Issues”” and then type a one to two page paper concerning the topics that you believed where worth your reading and understanding.  What was the most valuable thing that you learned and why?

Student 3:
Derivatives are financial securities that derive their value from an underlying asset or group of assets. An example of a derivative is a forward contract. This type of financial security creates an agreement between two parties to exchange a specified amount of currency at a specified exchange rate on a specified future date. Future contracts are another example of a derivative security where a contracts is made specifying that a specific volume of a type of currency is to be exchanged on a specified date. Derivatives can be traded over the counter or on an exchange, but OTC trades are what dominates derivative trading. Derivatives trading is often used to speculate future exchange rate movements subsequently hedging their exposure to exchange rate risk.
The risk in speculators using dangerous derivative products lies in the lack of proper regulations in OTC derivative trading. Such trading taking place on an exchange must adhere to established regulations and derivatives are standardized, meaning it is cleared and settled by an approved clearing house. Along with this, OTC derivative trading creates a greater possibility of counter-party risk as they are unregulated and involve a private transaction. Such an instance occurs when one party in the agreement defaults on the contract.
The problem with speculative trading during the 2008 financial crisis was a lack of oversight and regulation. The Dodd Frank act signed in 2010 had two sections concerning derivatives trading and the regulations surrounding them; Titles VII and XVI. Title VII dealt with valuation and taxation methods while Title XVI specifies which derivatives are exempt from “treatment as § 1256 contracts for taxation purposes.3” Speculators should be allowed to trade in complex derivative products as protections are in place for fraud and other associated risks. It is important to continuously revise and add to the regulations in place to ensure an even playing field down the road.