1. The credit crunch that started in August 2007 and whose effects are still being felt in 2020 has caused huge losses to the financial system. Early estimates thought the losses would be around $50 billion; then in early 2008 the losses were estimated at around $400 billion. Losses to the financial system stemming from the financial crash are now estimated at well over $1 trillion.

   Warren Buffet in his letter to shareholders in 2002 warned that derivatives were financial weapons of mass destruction. Derivatives are being targeted as part of the problem with the onset of the credit crunch. They have certainly made the problem worse.

   Discuss the features of the derivatives markets and products that made the credit crunch so severe?