Efforts or actions which are taken by companies to avoid regulation. Financial institutions typically face very different regulatory environments, and they prefer to take detours around unfavorable regulations- that hinder their profit making- by using custom-tailored derivatives. The accounting rules for swaps present a perfect example.

Swaps trade over the counter and are generally immune from most disclosure requirements that are imposed on other “conventional” financial instruments such as stocks and bonds. Merton Miller, a Noble-laureate economist opines that companies would enter into swaps not necessarily to allocate risk more efficiently, but rather because such instruments are unregulated.