What if we told you that there was a derivatives contract so perfect in concept and execution that the non-financial counterparty had huge potential upside without any downside risk? What if we further told you that everyone – all parties to the derivative, related institutions, and society as a whole – could be made holistically better off from the transaction? Wouldn’t that be the best derivative ever, worthy of special acclaim on World Derivatives Day? “Come, come,” you might say, “that’s too good to be true. This World Derivatives Day spirit has gone to your head, and you’ve forgotten core principles of economics like greed, moral hazard, and zero sum games. No derivative could benefit all stakeholders this way … right?” Let us begin by telling you about juvenile recidivism rates in Massachusetts. Every year in the Commonwealth, 4000 high-risk…

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