http://finance.yahoo.com/news/Brazil-to-your-bank-How-apf-2418761829.html?x=0&sec=topStories&pos=6&asset=&ccode=
Derivatives enable your life to be effected by being nothing more than a side bet.
Assmann is perpetually worried he will run short of cash if prices for his crops fall. So he tries to pay for some of his supplies at the start of the growing season with a fixed amount of soybeans that will be collected at the end.
His suppliers don't want to take on the risk of falling prices, either. But last month Philadelphia chemical maker FMC Corp. agreed to send Assmann all the insecticides and herbicides he needs in exchange for a third of his expected harvest.
Making the barter possible: A separate derivative that FMC, without Assmann's knowledge, got a bank to design. That side bet is designed to make sure FMC won't lose a penny if soybean prices fall.
"They seem very complicated," Assmann, 39, said when told about the derivative. "A poultry company here lost a lot of money in derivatives. I don't fully understand them."
Neither do most people, even though trade in many things we buy every day would slow or even stop without them.
Derivatives are private bets between two parties on how the value of assets like crops or measures like interest rates will change in the future. Most aren't traded on exchanges, and they're hard to value.
There's a derivative for nearly everything. You can bet that the Standard & Poor's 500 index will be higher in a year or the dollar will fall in value. You can bet that people of a certain age will die off faster than expected. A few creative financiers once devised a derivative that allowed you to bet on the value of future royalties from old David Bowie songs. Others came up with one to bet on how many basketball games the Utah Jazz would win in a year. And, yes, you can bet on soybeans in all their varieties -- crushed or ground, solid or oil, normal-sized or miniature.
For all the positives that investors see in derivatives, the investments can also be dangerous. Dubbed "financial weapons of mass destruction" by billionaire Warren Buffett, derivatives have been behind nearly every recent financial blowup from the bankruptcy of Orange County, Calif., in 1994 to the collapse of the housing market.
