The Origins of Derivative Instruments
While trading in derivative products has grown tremendously in recent times, early evidence of these types of instruments can be traced back to ancient Greece. Aristotle related a story about how the Greek philosopher Thalus profited handsomely from an option-type agreement around the 6th century B.C. According to the story, one-year ahead, Thalus forecast the next olive harvest would be an exceptionally good one. As a poor philosopher, he did not have many financial resources at hand. But he used what he had to place a deposit on the local olive presses. As nobody knew for certain whether the harvest would be good or bad, Thalus secured the rights to the presses at a relatively low rate. When the harvest proved to be bountiful, and so demand for the presses was high, Thalus charged a high price for their use and reaped a considerable profit.
While trading in derivative products has grown tremendously in recent times, early evidence of these types of instruments can be traced back to ancient Greece. Aristotle related a story about how the Greek philosopher Thalus profited handsomely from an option-type agreement around the 6th century B.C. According to the story, one-year ahead, Thalus forecast the next olive harvest would be an exceptionally good one. As a poor philosopher, he did not have many financial resources at hand. But he used what he had to place a deposit on the local olive presses. As nobody knew for certain whether the harvest would be good or bad, Thalus secured the rights to the presses at a relatively low rate. When the harvest proved to be bountiful, and so demand for the presses was high, Thalus charged a high price for their use and reaped a considerable profit.
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