Explain why investors may be attracted to high-risk investments such as exchange-traded derivatives, global funds, and other complex investment vehicles.

In order to improve potential returns, investors may choose to invest in high-risk assets such as global funds or exchange-traded derivatives. While these investments offer higher returns than the more conservative options, they also carry a greater risk of losing money. Exchange traded derivatives (ETD’s) are a popular form of high-risk investments due to the fact that these instruments can be used for hedging or speculation on underlying markets by leveraging large amounts of capital without requiring an upfront payment for the full value of the position taken.

The primary risk associated with ETD’s is counter party risk which is caused by one party defaulting on their commitment under an agreement [2] . The broker can reduce the risk of trading by using regulated exchanges, which have clearing houses that must guarantee settlement payments to any defaulting party. Brokers should also ensure that client money is kept separate from company funds to avoid customers losing out in the event of an insolvency.

Global regulations can be difficult to enforce and implement for financial companies that operate in multiple countries. Sometimes, there might not be regulations or rules governing specific activities. This can make compliance challenging if not impossible. The regulators must put in place regulations that are both compliant and sensitive enough to prevent competition, while still protecting investors regardless of their location.

Insider trading, where high-ranking employees have the ability to manipulate stock value in favour of their own gain or misreporting profits for investors in order to increase prices would both be examples of ethical violations. [5]. Consequences faced by those responsible should reflect how serious infraction was with punishments ranging from monetary fines being imposed , suspension & confinement depending severity magnitude impact inflicted public .Civil suits must enacted whereby firm itself held liable pertaining damages incurred

Finally , high –risk investments proven beneficial investors times when employed correctly . Suppose individual bought futures contract year prior based forecasted consumer confidence reports indicating 5% uptick buying behavior considering ‘x’ product line following quarter predictively result 20% profit taking sold day prior expiration expiry dates otherwise had losses accrues thus choices were calculated risks paid off handsomely end hereof traders diversified portfolio steady flow income generated situations leading remarkable growth return -on-investment expectations fulfilled accordances time constraints placed strategic positions henceforth usage derivative strategies utilized properly highly rewarding outcomes expected reaped rewards

[1] Barbuceanu, M., (2018). Derivatives Trading: What Are They & How Do They Work? Retrieved May 8 2020 https://www.thesimpledollar.com/investing/derivatives-trading/
[2] Tracy L. (2020). What Is Counterparty risk? – Definition & Analysis Retrieved May 8 2020 https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/counterparty-risk/#:~:text=In%20finance%2C%20counterparty%20risk%20is,or%20breaches%%%%their%%obligations.
[3]Gillen R.(2019). 6 Ways To Minimize Counterparty Risk When Trading ETFsRetrieved May 8 2020 http://moneygeekguide.comCounterpartyrisk.
[4]: Joseph Ackerly (2017), Global Financial Regulation : Findings From Research Retrieved May 9 2020 https://www8.gsb.columbia..edu//faculty_research/research_centers___initiatives//programs____projects./financial_regulation/_files /ackerly__gfrntrump2017fnlpdf.
[5] Dweck E., Ma Y. Nizam J.( 2019) The Role Of Equity Analyst Ethics And Insider Trading In Firm Characteristics And Analyst Forecast Accuracy Using European Data Sample Retrieved May 9thhttps://papers..ssrn…com////sol388210

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