Notes from Howard's Sabbatical from Working. The name comes from a 1998 lunch conversation. Someone asked if everything man knew was on the web. I answered "no" and off the top of my head said "Fidel Castro's favorite color". About every 6-12 months I've searched for this. It doesn't show up in the first 50 Google results (this blog is finally first for that search), AskJeeves says it's: red.
"Marketplace Senior Editor Paddy Hirsch is back with the second of his Crisis Explainer videos. This time he goes to the whiteboard to make the complicated world of credit default swaps easier to understand."
Nice explanation. One nit: he makes a convincing case that CDSs are insurance. But he fails to mention that had they been called insurance they would have been regulated and for the most part illegal.
This week's Economist has an article The Great Untangling that was good, though it went a little beyond me. "Some of the criticism heaped on credit-default swaps is misguided. The market needs sorting out nonetheless."
Nice explanation. One nit: he makes a convincing case that CDSs are insurance. But he fails to mention that had they been called insurance they would have been regulated and for the most part illegal.
ReplyDeleteCan you point me at or tell me more about it being illegal?
ReplyDeleteSee Should CDS be regulated like insurance?
ReplyDelete. The illegal aspect is that if CDS were insurance they wouldn't necessarily meet the following requirements:
1) having an interest in the insured item (insured-interest doctrine) and
2) not be able to insure an item for more than it is worth (indemnity doctrine).
Thanks, that was a really good read.
ReplyDeleteThis week's Economist has an article The Great Untangling that was good, though it went a little beyond me. "Some of the criticism heaped on credit-default swaps is misguided. The market needs sorting out nonetheless."
ReplyDelete