CHAPTER 17Synthetic Fixed Income and Rates—A Repo Puzzle: What Happened in July–August 2007?
The conventional wisdom about derivatives and other markets at the core of the financial system is that they are too complicated to understand without years of training and perspiration. Financiers want to keep it this way because it gives them an advantage.
The financial environment is actually pretty simple, and everyday experience has some clear analogues to its architecture. Start with people, businesses, and governments with financing needs. Depending on who they are, they can finance in a number of different ways. People typically take out loans from banks. Businesses can take out loans, issue bonds, and offer pieces of ownership (stocks). Governments ...
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