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This is actually a pretty typical example of a derivative. You can buy these bonds to get exposure to the loans without having to worry about managing them dire
by vostok 10y ago
This is actually a pretty typical example of a derivative. You can buy these bonds to get exposure to the loans without having to worry about managing them directly.
A CDS would be a derivative on a derivative. It would allow you to get exposure to these bonds without worrying about being long or short a particular issue.
- aianus 10y agoBy that logic, S&P 500 ETFs would be 'derivatives' too. (They're not.)
- joncooper 10y agohttps://en.wikipedia.org/wiki/Asset-backed_security https://en.wikipedia.org/wiki/Asset-backed_security
- vostok 10y agoI guess it depends on your definition. It would seem that, from a layman's perspective, ETFs and ABSs are both derivatives. If we look at GGP's comment > Buy up crap, package and obfuscate it, then sell it off as "high quality" crap to investors desperate for yield.
- partytran 10y agoDerivatives generally introduce leverage on a tracked asset. Leverage isn't a feature of securitized loans.