CHAPTER NINE
Credit where credit is due – fun with CDS and CDO
By the late 1990s, the money was in credit derivatives. I had a hunch about them when I first came across them at the start of the decade: I followed the money, moving into the ‘credit space’. As each new market became saturated, traders searched out new areas to slash and burn. Credit was ‘derivatized’. It was time for fun with CDS and CDO.
In hindsight, it was obvious – credit is like glue, it is the stuff that holds banks together. Everything a bank does involves taking credit risk. If it lends money to someone, the bank takes the risk it doesn’t get paid back. If the bank does a derivative contract, it takes the risk that the other party doesn’t perform its end of the bargain. ...
Get Traders, Guns and Money, 3rd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
