[lbo-talk] credit derivatives question (was "financialexchangesproportion?")

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Wed Feb 11 12:26:34 PST 2009


Dwayne writes:


> ZH redefines the CDS problem as being excessive and
> indiscriminate use rather than, as many put it once
> it became of topic of mass media comment, the
> existence of such derivatives.

I would say it's even more nuanced than that: it was the *vast, unhedged* use of them ... if your hedges "never" pay out, but always cost you money, there's a temptation to skip that part of the trade: hey, why not?

Well, six-sigma events is why not.

/jordan



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