Derivatives
The Financial Services Agency website provides information on derivatives. According to the website, derivatives have an interesting origin. In ancient Greece, the philosopher Thales used his knowledge of astronomy to predict a bountiful olive harvest the following year. He secured the right to borrow an olive press in advance. As expected, the olive harvest was successful, and the demand for olive presses increased, driving up the borrowing fees. Thales then borrowed the olive press at the agreed-upon price and lent it to others at a higher price, earning a significant profit. This can be seen as an early form of Option trading in today's terms. In Japan, during the Edo period in Osaka's Dojima district, rice merchants engaged in a pre-determined trading practice called "chouai-mai torihiki" or "bookkeeping rice trading." Rice prices are subject to constant fluctuations due to factors such as weather and natural disasters. The rice merchants wanted to stabilize the prices and mitigate the risk of unexpected market volatility. Through this bookkeeping rice trading, they could pre-determine the buying and selling prices of rice, eliminating the uncertainty that could lead to losses. This can be seen as a form of risk hedging by the rice merchants. Additionally, some participants in the trading would anticipate price increases or decreases and engage in trading to profit from these movements. This early form of trading in Japan can be considered the precursor to Futures Trading in modern derivatives. In summary, derivatives refer to agreements for future buying and selling. They have a rich history, with origins dating back to ancient Greece and Japan. Today, derivatives encompass various types of trading, including futures, options, and swaps.