A BRIEF HISTORY OF FINANCIAL
Presented at the
Seminar on Financial Futures
May 3, 1994
It is my very great pleasure
to address you this morning on a subject that is very close to my
heart. Indeed, the Chicago Mercantile Exchange and I have
become somewhat synonymous over the years as together we engineered
the financial futures revolution.
Financial futures occasioned
several milestones in their short history. The first two milestones,
both of a revolutionary nature, occurred on the floor of the Chicago
Mercantile Exchange. The first milestone was their very creation.
The departure by traditional futures from their century old agricultural
base and entrance into the world of finance dramatically changed
their direction and history. By definition, no financial futures
history could have ensued without its conceptual inception. It is
clear today that the revolutionary concept sponsored by the CME
in 1972 was destined to change the world of finance and become an
indispensable risk management tool the world over.
The financial futures revolution
began, like most great ideas, with a single concept: to give
business and financial managers the same risk transfer opportunities
that their agribusiness counterparts had been using successfully
for more than 100 years. Like most great ideas, however, its merit
was not immediately and universally recognized. The history
of the International Monetary Market and the start of financial
futures trading is as much a story of persistence, determination
and conviction as it is one of brilliance, insight or inevitability.
To borrow from Thomas Edison, the birth of the IMM was the result
of both perspiration and inspiration.
To fully comprehend the revolutionary
impact of the International Monetary Market on the history of futures
markets, one must first understand that, from its inception, the
IMM represented both a specific and general departure from traditional
futures. Although the IMM began life with foreign currency
contractsitself a revolutionary departure from the theretofore
agricultural base for futuresit represented a much broader
As the then chairman of the
Chicago Mercantile Exchange, I viewed the IMM as a potential marketplace
for a full range of financial futures. Consequently, I led
the institution in the creation of an independent division specifically
designed to exclusively specialize in instruments of finance.
This divisional concept played an important role in the phenomenal
success of the IMM as did the ultimate success of its first financial
vehicle, the foreign currency contracts.
While there is no single action
that stands out as the founding moment of the IMM, certain events
clearly played crucial roles in the new market's evolution from
dream to reality. One of the most important occurred on July
31, 1945 in a small resort town in the mountains of New Hampshire.
The Bretton Woods Agreement, signed by President Truman and representatives
of most Western European nations, established a narrow band of fluctuations
between European currencies and the U.S. dollar. It was the
breakdown of these established relationships twenty-six years later,
combined with other economic developments, that brought the need
for a way to hedge currency fluctuation risk directly before the
world financial community. The problem was clear. So
was the solution.
At the behest of the CME, Dr. Milton
Friedman authored a study in December 1971 which became the intellectual
foundation for the birth of currency futures. It was not a
major treatise, hundreds of pages long with footnotes and a bibliography.
The world-renowned economist stated all that he needed in just eleven
pages. His paper, entitled "The Need for Futures Markets in
Currencies," provided the CME administration with academic authenticity
of the highest magnitude to prove that their theory was a viable
necessity. As I often stated, "Professor Friedman gave our
idea the credibility without which the concept might never have
become a reality." For with Dr. Friedman's paper in hand,
we were able to convince government officials, bank presidents and
the CME brokerage community that the idea had merit.
"Bretton Woods is now dead,"
Dr. Friedman wrote. He looked at the series of monetary
crises that had shaken the world's economies that year and tried
to peer into the future. He saw two things clearly: Although
central banks were to set official exchange rates, a much wider
range of fluctuations would be permitted; and official exchange
rates would be less rigid and would be changed in response to much
less pressure. "The President's action (President Nixon) on August
15 in closing the gold window was simply a public announcement of
the change that had really occurred when the two-tier system was
established in early 1968," he observed. "No one can be sure
just what kind of a system will develop in coming years whether
the world will continue on a dollar standard or whether a substitute
international standard will emerge."
As a result of Professor Friedman's
strong support, the determination of the Exchange leaders, its Board
of Governors and its rank and file members, the IMM was chartered
by the State of Illinois in December of 1971. It opened its
currency contracts for trading on May 16, 1972.
Alas, hardly anyone recognized
that event as significant back in 1972. Indeed, hardly anyone believed
it to be of any consequence at all, and few gave it any chance of
success. Pundits and critics mocked the idea, regarding it as no
more than a joke or, at best, a quixotic impossible dream. Some
simply thought it ludicrous that a "bunch of pork belly crapshooters"
would dare contemplate treading on the hallowed ground of foreign
exchange. But succeed we did. The reason? Quite simple! Victor Hugo
explained it when he told us that no general was smart enough and
no army strong enough to suppress an idea whose time had come. In
fact, a New York foreign exchange expert was widely quoted a few
months after Dr. Friedman delivered his paper: "I'm amazed
that a bunch of crapshooters in pork bellies have the temerity to
think that they can beat some of the world's most sophisticated
traders at their own game."
But this missed the point.
The IMM was not out to beat anybody. Instead, as traders around
the world would learn, the new market was to become an important
adjunct and alternative to the world's interbank market. It
offered money managers and foreign exchange traders an avenue to
transfer their inherent risks unto the speculative world which,
in turn, welcomed the opportunity. It represented a new mechanism
that grew out of necessity and became mandatory in response to the
new financial era which had dawned.
But, as noted before, success
did not come easy. The IMM's currency contracts endured a
painful process of acceptance by the U.S. brokerage community
and the world's banking establishment. Its eventual approbation
came as a result of the stubborn determination of its early protagonists.
Only a visionary few could have known at the time just how important,
and how popular, these new contracts would become. The phenomenal
growth of the IMM and financial futures through a decade of international
tension, high inflation, oil embargos and stagnant economies, stands
as a tribute to the abilities, energy and patience of its founders.
The concept of a centralized
market for transferring foreign currency risk gained momentum in
1971 when the dollar was devalued and member countries of the International
Monetary Fund agreed to widen the original one percent parity to
a 2-l/4 percent par value level. This move was one of a series
of steps leading up to the eventual collapse of the Bretton Woods
Agreement which, in turn, ushered in an era of considerable risk
in currency price fluctuation risks which could be limited
if there were a viable market for currency futures trading.
As noted, on May 16, 1972, the
International Monetary Market opened for business, listing eight
foreign currency futures contractsBritish Pounds, Canadian
Dollars, Deutsche Marks, Dutch Guilders, French Francs, Japanese
Yen, Mexican Pesos and Swiss Francs. For the first time, the
economic benefits of risk transfer and price discovery that were
indigenous to futures became available to those outside the agricultural
sector. Trading on the new exchange began cautiously. But,
within two years, volume started to build momentum almost tripling,
from 144,928 contracts traded in 1972 to 417,310 in 1973.
Early on, IMM officials saw
an opportunity to encourage the growth of the fledgling foreign
currency futures market by allowing firms to become Class "B" clearing
members. Designed to facilitate foreign exchange arbitrage
between the interbank market and the futures market, these new members
not only succeeded in forging a close link between the two markets,
but also helped gain widespread acceptance of foreign currency futures
as alternative trading instruments for cash market participants.
When private ownership of gold
by U.S. citizens was legalized on December 31, 1974, the IMM
quickly responded with a new financial futures contract. The
Exchange introduced trading in gold futures that same day.
It represented the first expansion of IMM contracts into a second
type of financial instrument and emphasized the exclusive specialty
of the IMM Division.
Gold futures, unlike the currency
contracts, became an instant success because of the flexibility
and protection they provided to gold bullion dealers, institutional
traders and the general public within which there was a pent-up
demand of tremendous proportion for this metal. By 1981, gold
contracts were being traded briskly by individuals and institutions
throughout the world. In just seven years, volume had grown
to exceed 2.5 million contracts annually.
At the same time, enthusiasm
for foreign currency futures trading continued to build. More
than 959,000 contracts changed hands during 1974 and 1975 firmly
establishing the IMM as an important part of the global exchange
But, the IMM concept was much
broader than currency and gold. The revolution it had ignited
was now fast becoming an accepted reality. World events had
proved that futures provided a necessary new tool in financial arenas
and that their potential was therefore vast. Thus, the metamorphosis
of futures markets had reached a threshold from which vistas never
before imagined could be contemplated. The IMM, as well as
other exchanges, were now preparing to expand the original idea
and capitalize on what was bound to become the new era in futures.
A Growing Rate of Interest
The second major milestone in
the history of financial futures occurred with their extension to
interest rates. It was, of course, a logical next step and
began in the mid-1970s with the introduction of contracts on U.S. government
securitiesTreasury bills at the Merc and GNMAs and Treasury
bonds at the Chicago Board of Trade.
In the face of soaring inflation
and volatile interest rates, the IMM prepared for its entrance into
a vehicle of finance which would become one of the most important
contributions to the national economy. Trading in U.S. Treasury
bill futures began in January 1976 and represented the most important
stage in the revolution of futures markets which began with the
currency contracts. It also epitomized the broad scope of
the IMM as the specialized financial futures division envisioned
by its founders.
I should note that this leg
of the journey was one that was not easy. The U.S. government's
two major financial institutionsthe Treasury Department and
the Federal Reserve Boardwere very concerned about the effect
of such futures contracts on their official operations. Their
skepticism has not only vanished, but today, most Treasury Department
officials will acknowledge that the U.S. Treasury securities
market could not, in the face of a veritable torrent of borrowing,
have functioned so smoothly over the past few years without the
existence of futures contracts. Equally, the Federal Reserve
has recognized the good that interest rate futures can do for banks
and has not only permitted banks to use futures to manage risk but
has approved petitions by several banks to become directly involved
in the futures business.
U.S. Treasury bill futures
in their first five years grew to become the largest contract of
any on the CME or IMM with more than 5.6 million transactions in
1981. Moreover, they were an indispensable hedge vehicle for
money managers and government dealers whose overwhelming acceptance
of this contract prompted Exchange officials to pursue additional
interest rate futures.
As transactions in foreign currency,
gold and interest futures continued to grow worldwide, the Exchange
sought to extend the scope of services that could be offered from
its home base in Chicago and make itself more readily accessible
to market participants from around the world. In 1980, the
IMM opened offices in New York and London making possible direct,
person- to-person communications with Exchange officials and a continuous
educational and informational flow to new prospective market users
in major money centers throughout North America and Europe.
The third milestonecash
settlementcame in 1981. The Merc's Eurodollar contract became
the first to settle by way of payment in cash rather than by delivery
of the instrument itself. Once financial futures shed the requirement
of physical delivery, the curtain was opened to instruments and
concepts previously unthinkable. Cash settlement represented the
gateway to index products and seemingly limitless potential.
The third major stage in the
development of these futures markets was as revolutionary as their
very introduction in the first place. It again represented
a complete departure from past and accepted ideologies and forever
changed their direction. It called for the settlement of futures
contracts in cash rather than in delivery of the actual instrument
of trade. The new system thus enabled us to create markets
in instruments never before first by way of Eurodollar futures,
a contract on LIBOR time deposit rates and then later with the introduction
of our stock index futures.
For years we had nurtured the
dream of creating a futures contract that would allow people to
hedge against risk in the stock market. It was an impossible
dream, however, since we could find no way to make delivery of the
actual product. Delivery of stocks was out of the question
because of the complexity it represented and the expense involved.
Cash settlement of futures contracts,
however, overcame these obstacles and thus in 1982 the Merc got
into the stock index business with a contract on the Standard and
Poor's 500 index of stock prices. The S&P 500 is the standard
against which every manager of a stock portfolio, whether for a
pension fund or an insurance company, measures his performance.
Therefore, it was no surprise to us that S&P futures soon became
the premier stock index contract, one that today has captured over
75 percent of the business in this market sector.
The next important development
in our markets was brought about by the lifting of a 50-year prohibition
against the trading of options on commodities. Thus we were
able to expand vertically on markets that had their genesis in futures
contracts. We found that options in conjunction with futures
contracts offer market users an unending array of applications and
therefore give us every reason to feel that these instruments represent
a new successful dimension of futures markets.
Finally, financial futures took
another giant leap in 1984 when a mutual offset system was successfully
innovated between two different exchanges in two different time
zones. The Singapore International Monetary Exchange (SIMEX) and
the CME connection was as revolutionary a step in the development
of futures as any I have cited. It represents a system whereby
a position (long or short) in a given futures contract at the Merc
can be offset by an equal and opposite transaction (buy or sell)
at the SIMEX or vice versa. Obviously, such a system of mutual
offset represents an extremely cost-efficient methodology for global
trading of futures and will no doubt be a very positive influence
on the continued growth and use of these markets.
Another milestone for financial
futures, inspired by the telecommunications revolution, was also
led by the CME. For all the landmarks have a single common denominator;
each represent a dramatic departure from status quo. GLOBEXthe
automated global transaction system developed by the CME and Reuters
Holdings PLCrepresents a move toward automation in the transaction
process. It touches the very nerve center of status quo in our industry
and has incurred the criticism of those who would oppose any movement
toward change in automation or adoption of technological advancements.
The unequivocal truth is that
the world of futures is dynamic and continuously evolving. Complacency
is the enemy; innovation and change are at the very heart of our
success. As our markets' applicability extended to new products,
new techniques and new users, as our markets became the standard
tools for risk management, the changes we engendered were dramatic
This brief history of financial
futures, hopefully, has given you a general idea of their development
and will enable us now to take a closer look at these markets themselves.
Clearly, the mechanics of futures trading as well as the nature
of contract specifications is every bit as interesting as what is
The most striking thing about
futures noticed immediately is that the units of trade of a given
contract are all the same. In other words, rather than being
personalized as in the commercial world, futures contracts are standardized.
Indeed, while in the spot market you can buy or sell U.S. Treasury
bills with maturities ranging from a few days to a year, in futures
you can only trade in units of $1 million of U.S. Treasury
bills with exactly 13 weeks to maturity.
Moreover, futures contracts
can be settled only at a limited number of set times during the
year. In the case of the Treasury bill contract, delivery
can take place only in March, June, September or December.
In the spot market, of course, delivery can be made at any time
that is acceptable to both sides of the transaction.
At first glance, one may consider
such a high degree of standardization to be very restrictive.
Actually, this is the very element of futures that gives them their
wide appeal. Even though a futures contract may seldom offer
the precise specifications needed in a prospective commercial transaction
or hedge, it serves as a model for a wide range of commercial needs
and uses. Their standardization thus allows a wide range of
people who face risk in a wide range of specific commodities to
focus their attention on a single marketthe market for the
futures contract. The result of that focus is a concentration
of liquidity. And, it is the liquidity that you can find in
a futures market together with the resulting low costs of buying
and selling that endow them with their primary virtue.
The way we trade is another
important reason for the success of futures markets. First,
all trading is done by open outcry in a competitive arena.
If you wish to buy or sell, you must shout the price for everyone
surrounding you to hear. Second, our markets are open to anyone.
We do not keep people out of the market because we do not know themnor
do we ask their commercial reason for trading. As a result,
complete strangers, from commercial and investment worlds, who might
otherwise never have done business together, are given access to
a trading arena allowing them to transfer or assume risk.
This is an important virtue of futures markets which should be obvious
and a point to which I would like to return shortly.
The Success of Financial
Financial futures have been
so extraordinarily successful since their creation because they
are especially useful for managing risk, and they do not allow embarrassing
losses to be swept under the carpet. Consider these in turn.
First, consider the efficiencies.
Everyone who does business in financial markets finds his business
to be a complex combination of performing services and taking risks.
Take, for example, the government securities market in the United
States. In our country, the job of buying and distributing
the government securities sold weekly by the U.S. Treasury
has fallen quite naturally to a relatively small group of government
securities dealers. Their chief function, of course, is to
distribute these securities to their ultimate investors.
In doing this job, however,
each dealer finds it worthwhile to make a market in these securities,
and this functiontogether with the task of buying and distributing
the securitiesrequires a dealer to hold large quantities of
bills, notes and bonds. And, of course, having to hold a position
exposes the dealer to risk. How does the dealer cope with the inherent
risk of his profession? Well, before the advent of interest
rate futures, he had two optionshe could limit the size of
his position, or he could take an offsetting position in the forward
The first approach to managing
risk interferes with his function as an underwriter. If he
is concerned with interest rate risk, he bids less aggressively
in Treasury auctions and requires higher bid/ask spreads to compensate
him for making a marketthe higher resulting costs are then
necessarily passed on to the consumer.
The second approach to managing
risk, trading in the forward market, is costly, cumbersome and has
the undesirable effect of blowing up the size of his balance sheet.
Since forward trades are made between specific individuals, the
dealer who sells into the forward market and later buys in the forward
market most often will have two positions on the booksa short
position resulting from the first trade, and a long position resulting
from the second. As you can imagine, enough of these trades
can produce bloated balance sheets fraught with credit risk.
In contrast, opposite trades
done in the futures market are completely offsetting. Since
they are all fungible, it does not matter which obligation is offset
with which trade. That is, a short sale followed by a purchase,
or vice versa, will leave the dealer with no position at all. He
will be out of the market altogether rather than having to carry
the burden of a complex network of short and long positions in the
Thus, with financial futures,
the government securities dealer is armed with a superb risk management
tool that allows him to hold as large a position as he thinks is
necessary for him to compete effectively in doing his job.
The same is true for banks.
The main function of a bank is to provide transactions services
and to be an intermediary between lenders and borrowers. In
the past, however, these jobs also required a bank to undertake
the risk exposure to changes in interest rates. Depositors
seldom want to lend at the same maturities at which borrowers would
like to borrow. Faced with such risk, a bank would demand
compensation in the form of a lower rate paid to lenders and a higher
rate charged to borrowers.
Now, however, banks can balance
their risk exposure efficiently by taking positions in futures markets.
There is no longer any need to impose on their clients the costs
of bearing interest rate risk. As a result, banks are able
to perform their primary function.
A natural question, of course,
is how much all of this matters. On this score, I can assure
you that futures markets matter a great deal. Our interest
rate futures markets close at 2:00 PM Chicago time, 3:00 PM New
York time. This, however, does not mean trading in government
securities ends at that time -- it does not. But, the trading
that continues after our market closes is done at bid/ask spreads
that can be twice as wide as those available while our markets are
open. By the same token, the trades done without our markets
are considerably smaller in size. The reason, of course, is
that a commercial trader is far less willing to take on a position
he cannot immediately hedge in the futures market.
The difference this makes to
the public good is quite obvious. The bid/ask spreads available
when the futures markets are closed are those you would see all
the time if there were no futures markets. And, the cost of
these larger bid/ask spreads would be borne either by the taxpayer
(who would have to pay the higher borrowing cost associated with
the lower bid) or by the investor (who would get the lower return
associated with the higher offer). All in all, it is quite
clear that financial futures have been of significant benefit to
the U.S. debt markets and thereby to the American public.
I should note that the corporate
sector also reaps substantial savings from our markets. The
investment banking firms who underwrite corporate bond issues hedge
their risk in futures markets. Because they can do so, they
are willing to bid more aggressively for the right to underwrite
corporate bonds. The result of more aggressive bidding is
a lower cost of for the corporate borrower.
Another aspect of the efficiencies
permitted by futures contracts stems from their use as a temporary
substitute for doing a trade in the cash market where transactions
costs can be quite substantial. Consider, for example, the
problem faced by someone who manages a portfolio of stocks but who
is worried about a decline in the general stock market.
Before the advent of stock index
futures contracts, the only way to deal with the risk of a decline
in the stock market was to sell stocks out of the portfolio.
Anyone who runs a portfolio hates to do this for two reasons.
First, to sell a stock and later buy it back is expensive in terms
of market impact and brokerage commissions. Second, and possibly
worse, is that the portfolio manager selected those stocks for a
reason -- he believed those stocks would yield higher rates of return
than other stocks available in the marketplace.
The portfolio manager's dilemma
is that he wants to sell the market but keep his stocks. This
dilemma is resolved by the stock index futures contract. Using
the S&P 500 futures contract, the portfolio managerif
concerned about a decline in the stock marketcan retain his
stocks while selling the stock index futures. The transaction
costs of this approach are demonstrably lower than the costs of
actually selling the stocks and buying them back again. And,
of course, the productivity of the fund manager's research department
is enhanced if the stocks in the portfolio outperform the market,
enabling the fund manager to reap those rewards even if the stock
market does decline.
The last point I would like
to make concerns a property of futures markets appreciated by all
too few. Recall that we require everyone to settle their losses
at the end of every day. This practice is called mark-to-market,
and if a trader fails to make good his losses (no one ever turns
down gains), his position is closed out and he is not allowed to
Requiring all gains and losses
to be settled each day has the striking salutary effect of requiring
those who sustain losses to recognize them the instant they occur.
It is impossible to let losses ride or to sweep them under the carpet.
The importance of this feature for banks and other financial institutions
should be clear. The failures of Herstatt Bank in Germany
and Franklin National Bank in this country were in large part the
result of trading losses hidden either from management or from the
public eye, or both.
Major banks in Japan have not
been immune from such problems. Fuji Bank, for example, recently
sustained major losses due to unauthorized trades -- and the losses
were compounded because they were kept hidden from management's
view. Such a thing almost certainly could not happen with
A trader might make an unauthorized
trade but, if he were to sustain a loss, we would require the loss
to be made good the next morning. As a result, the comptroller of
the bank who must cover the loss, knows immediately about the trades.
As a result, the position cannot be tucked away in a drawer or under
a blotter and the losses cannot be allowed to run. In this
way, futures contracts provide an exceptionally effective management
tool for those whose job it is to monitor the financial integrity
of their companies.
Historical and anecdotal references
notwithstanding, it fair to say that the modern concept of financial
derivatives as tools in business dates back only about twenty years.
The process was initiated by the financial futures revolution in
the early 1970s when the International Monetary Market was launched
at the Chicago Mercantile Exchange with the express intent of developing
futures trade in financial products. This innovation created the
first broad-based risk management instruments and ushered in the
Era of Financial Futures. Thereafter, evolutionary forces in finance,
global markets, and world economiescoupled with advancements
in computer technologytransformed these relatively simple
tools into the present genre of complex derivatives.
The backdrop to this metamorphosis
was modern academic theory which fostered the philosophy of risk
management as a necessary business regime. General acceptance of
this principle spurred the idea of breaking down risk into its basic
components. Consequently, an infinite number of financial derivative
contracts are being created whose values depend on the value of
one or more underlying assets or indices of asset values. The primary
purpose of these instruments is not to borrow or lend funds but
to transfer price risks associated with fluctuations in asset values.
Clearly, the most powerful force
affecting the growth of derivatives has been technology. High-capacity
computing and telecommunications have not only prompted off-exchange
and screen-based trading, but have permitted the creation of complicated
new products at a low cost. Financial engineers comb world markets
looking for inefficiencies, volatility, and investors' dilemmas,
using their computers to create models and products to solve the
perceived problems. It is believed that a new derivative instrument
is invented weekly. In what Forbes calls the "age of digital
capitalism," formerly impossible tasks such as breaking up a Fannie
Mae mortgage pool into 36 tranches of different maturities is now
something that can be done on a routine basis.(1)
In other words, mathematicians, physicists, scientists and "quants"
are replacing economists and account executives.
The majority of such contracts
can be placed into one of four categories: foreign exchange, interest
rate, commodity, and equityreflecting the most common forms
of financial risk. The bulk of derivatives trading presently is
in interest-rate and foreign exchange swaps, but it is rapidly expanding
into equity, commodity, and insurance markets. Indeed, with modern
high-speed computer competence, the range and possibilities of derivatives
is limited only by the imagination of financial engineers and the
demand of market participants. Virtually any income stream can now
be exchanged for any other income stream. These inventions cover
the full gamut of financial risk and their esoteric acronyms are
represented by the entire alphabet.
In a macro-economic sense, derivatives
have played a major role in increasing the liquidity in capital
markets and in developing more efficient global intermediation processes.
By acting as a catalyst for the integration of various markets,
these instruments serve to foster rapid growth in international
trade and capital flows, allowing excess savings in one market to
be channelled into another. This process offers assistance to emerging
capital centers by funneling investment of savings from mature industrialized
countries into higher yielding opportunities in developing nations.
We live in a world where financial
derivatives are used to protect against interest rate and exchange
rate exposure, to manage assets and liabilities, to enhance equity
and fixed income portfolio performance, and protect against commodity
price rises or mortgage interest expenses. As a consequence of their
application, risks are reduced and profit is increased over a wide
range of financial enterprises and in various waysfrom businesses
whose efficiency is enhanced, to banks whose depositors and borrowers
are benefited; from investment managers who increase their performance
for clients, to farmers who protect their crops; and from commercial
users of energy, to retail users of mortgages.
When reflecting on the dramatic
changes that have transpired in global markets over the past two
decades, one overriding principle must be remembered: In our global
market environmentan environment driven by instantaneous information
flows and sophisticated technologyfinancial risk is ubiquitous
and unending. Its management will continue to be the fundamental
goal of investors and money managers. Futures, options, and other
forms of derivatives provide the ability to identify, price and
transfer existing risks. These instruments have become the premier
tools of risk management and will continue to function as such for
the foreseeable future.
Robert Lenzer and William Heuslein, "The Age of Digital Capitalism",
Forbes, 29 March 1993, 62-66, 71-72
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