Brief History of derivatives
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> 2000 B.C.
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Derivative contracts emerged as soon as humans were able
to make credible promises
Van de Mieroop (2005) reproduces a tablet in which a
supplier of wood, whose name was Akshak-shemi, promised to deliver 30 wooden
planksto a client, called Damqanum, at a future date.
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1805 B.C.
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Zohary and Hopf
(2000, pp. 140-141) maintain that the sesame plant was
cultivated in the
2250 and 1750 BC. The following tablet, which is from 1809 BC, shows that a Mesopotamian
merchant borrowed silver, promising to repay it with
sesame seeds “according to the going rate”
after six months. This contract combines a silver loan
with a forward sale of sesame seeds.
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1700 B.C.
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A tablet from about 1700 BC, displays two farmers
received from the King’s daughter three kurru of barley, which had to be returned at harvest time. The farmers, who
were brothers, probably used the barely, about 0.9 cubic meters, as seed
stock for planting a field.
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It is a tragic fact that slave trade was prevalent during
much of commercial history. A tablet from 1750 BC provided a slave trader
with funding and insurance. At the time when the contract Around 1800 BC, the
price of a slave was about 24 shekels
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This contract provided the slave trader with capital to
procure slaves from Gutium. The
option to pay 1/3 mina 2/3 shekels of silver limited his
loss if he was not able to buy slaves at a
price that made the transaction profitable. It also
provided insurance against all other hazards of
the slave trade
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1000 B.C.
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The emergence
of contracts for future delivery enhanced the efficiency
of agricultural markets in
and they were a prerequisite for the expansion of
long-distance trade.
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400 B.C.
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for future delivery in sea-borne trade because the city depended on the import of grain
from
commercial and legal system intact, which had descended
from
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300 B.C.
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During the third
century BC, Roman law caught up
with commercial practice, providing for contracts for future
delivery of goods. Swan (2000,
Chapter 3.2) considers the treatment of
contracts for future
delivery in Roman law.
The Romans, who copied much of
Greek culture, initially adopted the Greek restrictions on
contracts for future delivery.
But these restrictions clashed with the commercial realities of the
vast Roman Empire, which
reached from Britannia to
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200 A.D.
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Sextus Pomponius, a lawyer who wrote in the second century AD,
distinguished between two types
of contracts. The first, vendito re speratae, which was void if the
seller did not have the goods
at the delivery date, provided insurance against crop loss and the
hazards of long-distance trade,
including the loss of ships in maritime trade. The second, vendito
spei, was a straightforward
forward contract that did not provide for any reprieve to the seller in
case he was unable to deliver
the goods
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400 A.D.
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According to Swan (2000, pp.
80-81), the principle of privity of contract eroded only 10
slowly in a legal process that
lasted until the end of the
East Roman Emperor Theodosius
II (401-450) and Byzantine Emperor Justinian (482/83-565)
suggest that
derivatives over-the-counter
after they had been written.
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The available sources only
support the conclusion that Roman derivatives included contracts for
future delivery of goods that
initially were held until the delivery date and that were traded over
the-counter after some unknown date.
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100 B.C.
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by Malmendier (2005). Societas
publicanorum, which were private companies that tendered for
government contracts, issued
shares that were widely held by Romans. Cicero, who lived from
106 to 43 BC, commented on the
trade in these shares, which is said to have taken place near the
the principle of privity of
contract
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