In the case of debt instruments, investors may now choose among structured notes, syndicated loans, coupon STRIPs and bonds secured by pools of other debt instruments. But of all the changes we have observed in the past three decades, two of the most dramatic have been the growing use of financial derivatives and the increasing presence of banks in private equity markets.
Today I should like to evaluate the scope of these latter progressions, the risks they entail and some of the challenges in managing those risks. It seems undeniable that in recent years the rate of financial innovation has quickened.