Abstract
It is an indisputable fact that the present financial and economical tsunami is one of the worst slowdowns just close to the previous one, being the economic collapse in 1929. Indeed each semester previsions a particular percentage of growth. However, this foresight is depleting in terms of the growth scenario deteriorating and getting worse from time to time. This impact is adverse as the plummeting vision states that the world economy might even endure recession. Then a chain of reactions led to a major crisis and final losses could stand between one and two trillions of dollars. Well established banks such as Lehman Brothers, Bear Stearns or Northern Rock have reached a stage of bankruptcy and the governments of most of the developed countries have had to set up rescue operations. While encountering such a severe turmoil, the next step is to infer the possible causes for this kind of an economic slump. Identifying the factors that has led to the crisis is necessary to implement reforms and avoid future disasters. Many explanations have been provided and several of them have been condemned as derivative products. To quote more precisely, the concept focuses on credit derivative products. Warren Buffet who is the greatest investor of all times, and has proved in ever so many situations that his time tested strategy in the investment area is a success has critically declared the derivative products as 'financial weapons of mass destruction' in 2003. The hypothesis based on which Warren declared this statement was insignificant as the statement was made without having the forethought of something like the actual crisis.
