You don't understand shit.
Naked short selling, or
naked shorting, is the practice of
short-selling a
financial instrument without first
borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale. When the seller does not obtain the shares within the required time frame, the result is known as a "fail to deliver". The transaction generally remains open until the shares are acquired by the seller, or the seller's broker settles the trade.
[1
THAT'S what caused Lehman and Bear Stearns to fail.
Naked short selling isn't a derivative.
Try again? Dumb shit.
Derivatives, from Investopedia:
2003-2007 - The Real Use (or Overuse!)
The initial intention was to defend against risk and protect against the downside. However, derivatives became speculative tools often used to take on more risk in order to maximize profits and returns. There were two intertwined issues at work here: securitized products, which were difficult to price and analyze, were traded and sold, and many positions were leveraged in order to reap the highest possible gain.
Poor Quality
Banks, which did not want to hold onto loans,
pooled these assets into vehicles to create securitized instruments that they sold to investors such as pension funds, which needed to meet an increasingly difficult-to-reach
hurdle rate of 8-9%. Because there were fewer and fewer good credit-worthy customers to lend to (as these customers had already borrowed to fill their needs), banks turned to subprime borrowers and established securities with poor underlying credit-quality loans that were then passed off to investors. Investors relied on the rating agencies to certify that the securitized instruments were of high credit quality. This was the problem.