Which class of derivatives have been blamed most widely for causing the financial crisis of 2008?
A) Equity derivatives.
B) Interest-rate derivatives.
C) Foreign exchange derivatives.
D) Credit derivatives.

Question

Quizplus · Accepted Answer

Credit derivatives, specifically the use of complex and opaque products such as credit default swaps, were widely blamed for the financial crisis of 2008. These products allowed investors to place highly-leveraged bets on the value of mortgage-backed securities, contributing to the housing bubble and subsequent collapse of the subprime mortgage market. The interconnectedness of these products also led to contagion throughout the financial system when defaults began to spread.

Which Class of Derivatives Have Been Blamed Most Widely for Causing