Derivatives (such as forwards, futures, options, and swaps) can be risky financial investments. Felix Rohatyn—the investment banker who had helped New York City to restructure its debt in the 1970s and avoid bankruptcy—was cited in the July 1992 Institutional Investor criticizing young MBAs who toy with derivatives. Rohatyn warned: “26-year-olds with computers are creating financial hydrogen bombs.”
   
The “financial hydrogen bombs” description of derivatives has been frequently cited. In March 2003, investor Warren Buffett described derivatives as “financial weapons of mass destruction.”
   
     
Wikipedia: Derivative (finance)
Derivatives are financial instruments, whose prices are derived from the value of something else (known as the underlying). The underlying on which a derivative is based can be the price of an asset (e.g., commodities, equities (stock), residential mortgages, commercial real estate, loans, bonds), the value of an index (e.g., interest rates, exchange rates, stock market indices, consumer price index (CPI) — see inflation derivatives), or other items. Credit derivatives are based on loans, bonds or other forms of credit.

The main types of derivatives are forwards, futures, options, and swaps.
 
Derivatives can be used to mitigate the risk of economic loss arising from changes in the value of the underlying. This activity is known as hedging. Alternatively, derivatives can be used by investors to take a risk and make a profit if the value of the underlying moves the way they expect (e.g. moves in a given direction, stays in or out of a specified range, reaches a certain level). This activity is known as speculation.
   
Wikipedia: Felix Rohatyn
Felix George Rohatyn (born May 29, 1928 in Vienna, Austria) is an American investment banker known for his role in preventing the bankruptcy of New York City in the 1970s, who also served as United States Ambassador to France. He was a long term advisor to the U.S. Democratic Party.
 
Career in finance
Rohatyn’s family lived in France from 1934 to 1942, and fled the Holocaust with the help of Luiz Martins de Souza Dantas.  He received his Bachelor of Science degree in physics from Middlebury College in Vermont in 1949 following which he joined the New York office of the investment bank Lazard Frères under André Meyer. He was made partner in the firm in 1961 and later became Managing Director. While at the firm, he was involved in numerous large deals, most notably advising the conglomerate ITT in its various acquisitions. Rohatyn became widely known in the 1970s for successfully restructuring New York City’s debt and resolving the city’s fiscal crisis. While running MAC for the city of New York, Rohatyn continued his deal making at Lazard, while shining away from most of the administrative works at the firm, which eventually led to the succession of Meyer after his death by Michel David-Weill. While capping his take at the firm at 6%, Rohatyn continued to be the preeminent rainmaker at Lazard well into the 90s, completing such deals such as the acquisition of Columbia by Sony.
 
In 1991, Rohatyn chose to back Ross Perot, a long time client, instead of Bill Clinton, which resulted in him losing the coveted Secretary of Treasury position, despite being the most prominent Democratic economic voice for dozens of years. In 1996 the Clinton administration put forward his candidacy for the post of Vice Chairman of the Federal Reserve, but a formal nomination was not made because of ideological opposition from Republicans.
 
In 1990, he received The Hundred Year Association of New York’s Gold Medal Award “in recognition of outstanding contributions to the City of New York.” Mr. Rohatyn is also the recipient of The International Center in New York’s Award of Excellence.
 
On August 22, 2006, he was appointed by Lehman Brothers as chairman of its international advisory committee and as a senior adviser to its chairman, Richard S. Fuld, Jr.
 
The Independent (London)
Jumping blind into the futures: Few understand financial derivatives
BAILEY MORRIS in Washington
Sunday, 10 October 1993
HAVING thoroughly digested the Group of 30’s report on its landmark study of financial derivatives, I now agree with the practitioners that this is not a game for ‘the little people’. Only the big fish are going to survive in this dollars 5,000bn pond.
 
The US magazine Business Week has identified derivatives as a key component of the new global ‘casino’ society, characterised by trillions of dollars of debt sloshing around the world through invisible channels. Felix Rohatyn, the New York investment banker, is credited with the remark that derivatives are financial hydrogen bombs built by 26-year-old MBAs on personal computers.
     
Google Books 
Derivative Financial Markets
By United States. Congress. House. Committee on Energy and Commerce. Subcommittee on Telecommunications and Finance
pt. 1 - 1994  
Pg. 2:
Bearly 2 years ago, senior investment banker and Wall Street guru Felix Rohatyn warned that “26-year olds with computers are creating financial hydrogen bombs.”
 
Google Books
Managing Derivatives Risk:
Establishing Internal Systems and Controls
By Dimitris N. Chorafas
Chicago, IL: Irwin Professional Publishers
1995
Pg. 16:
Big and small banks and other companies are the crowd Dr. Felix Rohatyn probably had in mind when he stated that “26-year-olds with (Pg. 17—ed.) computers are creating financial hydrogen bombs.”*
*International Investor, July 1992.
   
Google Books
Value at Risk
By Philippe Jorion
New York, NY: McGraw-Hill, Inc.
2000
Pg. 31:
These losses have spawned a flurry of legislative activity into the regulation of derivatives markets. Wall Streeter Felix Rohatyn has warned that “26-year-olds with computers are creating financial hydrogen bombs.” Former House Banking Committee Chairman Henry Gonzalez has claimed that derivatives are “a monstrous global electronic Ponzi scheme.”
     
Sean Hannity Discussion
Slumber Jack
March 1st, 2009, 3:02 pm
The Financial Hydrogen Bomb: Credit Default Swaps
What the media is not telling you. Credit default swaps are the plutonian of the financial hyrogen bomb. Mortgages are only the trigger. London and WallStreet were the developers, and Clinton as well as 106th Congress were the facilitators. Contracts supporting these instruments are about 5 years out. This is only the beginning of a wild market ride that super secret hedge funds profited from. Transparency is not Obama’s intention, and Holder will bendover for WallStreet.