CHAPTER SEVEN
Games without frontiers – the inverse world of structured products
In 2005 Leo Melamed, one of the founders of the financial futures markets, drew confused looks at a conference when he remarked, ‘What the hell is a swap anyway? A swap used to be something between husband and wife in New Jersey some time back.’1 If swaps are sex, then structured products are kinky sex.
The derivative gravy train was short-lived; the high early profits shrank under the pressure of competition. Derivative traders innovated, motivated by higher profit margins. They either created complex packages of derivatives or found new markets. The packages were known as ‘structured products’ and traders hoped that clients wouldn’t see through the wrapping. ...
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