Why study derivatives?

THIS author had a chance, in the late 1990s, to enroll in a Finance class by Robert Merton at Harvard. Merton is well known for his continuous-time finance contribution that led to the Black-Scholes-Merton model in derivative pricing. Together with Myron Scholes, Merton won the Nobel Prize for this model.

That was my first exposure to the use of derivative instruments. It was not a seamless experience because, at that time, and until today, more than two decades after, the Philippine economy has no options and futures markets. It was a struggle grappling with instruments only read about in business papers.