But use of the new instruments has resulted in large and well-documented losses to some firms, while other firms have used the new instruments to hide losses from more traditional activities. Policymakers generally have supported the use of derivatives and other new risk-transfer mechanisms by regulated and unregulated entities.
Policymakers have tried to create incentives for risk mitigation and have sought to address potential pitfalls through a combination of regulatory oversight and market discipline. However, some have raised concerns about the potential effects of the new risk-management techniques on the stability of the financial system as a whole.