Well, I’ve read a paper that supports a different perspective: usury laws were historically circumvented in the West and Middle East through clever use of (what we now call) the Put-Call Parity Theorem: any bonds that were issued were converted into a combination of puts, calls, and possibly rental contracts. This retains the substance of an interest-bearing loan, but without any explicit “interest payment” While the law might have been sophisticated, the resulting use of derivatives contracts was not.
The paper discusses the origin of mortgages in medieval England and the Middle East. It’s been a while since I read it, so I can’t summarize it, but I was shocked by their rather early trading of derivatives and options.
Well, I’ve read a paper that supports a different perspective: usury laws were historically circumvented in the West and Middle East through clever use of (what we now call) the Put-Call Parity Theorem: any bonds that were issued were converted into a combination of puts, calls, and possibly rental contracts. This retains the substance of an interest-bearing loan, but without any explicit “interest payment” While the law might have been sophisticated, the resulting use of derivatives contracts was not.
The paper discusses the origin of mortgages in medieval England and the Middle East. It’s been a while since I read it, so I can’t summarize it, but I was shocked by their rather early trading of derivatives and options.