Quote:
Originally Posted by DaiNasty
Good grief !!!
I've just started reading up on these things.
http://en.wikipedia.org/wiki/Credit_default_swap
That's seriously scary stuff.
"Credit default swaps have existed since the early 1990s, and increased in use after 2003. By the end of 2007, the outstanding CDS amount was $62.2 trillion, falling to $26.3 trillion by mid-year 2010." |
Puts a different perspective on why Greece and the other PIIGS should be handled with great care
In trading generally even with gearing a little is risked often with the hopes that the eventual cumulative gains will add up to a lot. The super whizz kids in the major banks, always hungry for fast returns, created cannot lose instruments. The trouble with such instruments is that invariably because they are so safe they require risks of a great deal of money for a little reward. LTCM (long term capital management) went down that sort of route and vanished into the abyss with the Fed picking up the bill.
Humans never learn and betting on a supposedly sure thing with the ranch is the way to destitution. Shame the banks weren't limited to using just their own money
If the consequences of CDS being triggered wholesale is a potential financial Armageddon you can be sure that irrespective of all the posturing on the global stage, that it will be avoided. I wouldn't lose any sleep over it but it does show how just stupid or short term orientated the brightest and best can be.