Through the eyes of an inventor of new markets, “Good Derivatives: A Story of Financial and Environmental Innovation” tells the story of how financial innovation - a concept that is misunderstood and under attack - has been a positive force in the last four decades. If properly designed and regulated, these “good derivatives” can open vast possibilities to address a variety of global problems. Filled with provocative ideas, fascinating stories, and valuable lessons, it provides both an insightful interpretation of the last forty years in capital and environmental markets and a vision of world finance for the next forty years.
As a young economist at the Chicago Board of Trade, Richard Sandor helped create interest rate futures, a development that revolutionized worldwide finance. Later, he pioneered the use of emissions trading to reduce acid rain, one of the most successful environmental programs ever. He provides unique insights into the process of creating these new financial products. Covering both successes and failures, the story describes the relentless educational effort that was required to build support for these new inventions in places like Chicago, New York, London, Paris and how their impact is unfolding today in Mumbai, Shanghai and Beijing.
The book also tells the story of the creation of the Chicago Climate Exchange and its affiliated exchanges (European Climate Exchange, Chicago Climate Futures Exchange and Tianjin Climate Exchange). The lessons learned in these markets can play a critical role in effectively addressing global climate change and other pressing environmental issues, such as rainforest destruction, water problems and biodiversity threats. The author argues that market-based trading systems are far more effective in reducing pollutants than traditional “command-and-control.”
Written in an engaging narrative style, “Good Derivatives” is of interest to both practitioners and general readers who want to better understand the creative process of financial innovation. In the middle of so much distrust of markets, it is also a recipe of how transparent, well-regulated markets can be a benign force in environmental, health, and social areas.
RICHARD L. SANDOR, a financial innovator known as the “father of financial futures,” has been at the epicenter of environmental and financial markets for more than four decades. He founded what became the Climate Exchange family of companies including: the Chicago Climate Exchange (CCX), the world’s first and North America’s only voluntary, legally binding greenhouse gas cap-and-trade system; the Chicago Climate Futures Exchange (CCFE), the world’s leading futures exchange for environmental products; and the European Climate Exchange (ECX), Europe’s leading exchange operating in the European Union Emissions Trading Scheme. Dr. Sandor was honored by the City of Chicago for his contribution to the creation of financial futures and his universal recognition as the "father of financial futures.” In August 2002 TIME Magazine chose Sandor as one its “Heroes for the Planet” for his work as the founder of the CCX. In October 2007 Dr. Sandor was honored as one of TIME Magazine’s “Heroes of the Environment” for his work as the “Father of Carbon Trading.” Dr. Sandor is a Distinguished Professor of Environmental Finance at Guanghua School of Management at Peking University, a Lecturer in Law at the University of Chicago Law School, and a member of the Advisory Board at the Center for Financial Stability.