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Forward Contracts Preference Exception Broadly Construed, Brian King
Forward Contracts Preference Exception Broadly Construed, Brian King
Bankruptcy Research Library
(Excerpt)
Derivative transactions and financial contracts are a critical component of the United States economy. There are three main types of derivative contracts executed in our markets: futures, options and forward contracts. Each of these instruments derives value from an underlying security or resource with focus on a possible change in its future value. These instruments can be used as speculative investments, as hedges on securities already owned, or as a means of mitigating risk on volatility within a specific industry. An essential attribute of trading in these derivatives is “the ability of the parties to value their transaction on …
Transaction Consistency And The New Finance In Bankruptcy, David A. Skeel Jr., Thomas Jackson
Transaction Consistency And The New Finance In Bankruptcy, David A. Skeel Jr., Thomas Jackson
All Faculty Scholarship
Prior to the enactment of the Dodd-Frank Act last summer, derivatives and repurchase agreements (“repos”) were largely unregulated outside of bankruptcy, and also were exempted from core bankruptcy provisions such as the automatic stay, which prevents creditors from seizing collateral or attempting to collect what they are owed. The Dodd-Frank Act now extensively regulates derivatives outside of bankruptcy, but it left their special treatment in bankruptcy completely untouched.
There is a gap in the debate over this special treatment. To date, neither scholars nor the derivatives industry have fully analyzed the key counterfactual: what would happen if derivatives and repos …