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See, every CDO trader already knew where things were trading, and could already derive all implied default rates already. Information dissemination / transpare

• trevelyan 9y ago
  The problem with this is that overall losses were nowhere near 65 cents on the dollar -- only 20 percent of US mortgages were subprime at the peak of the GFC. If the market was rational and had full insight into the performance of its securities, losses would have been no more than 20-35 cents on the dollar. That is enough to cause a major crisis, but it wouldn't trigger the paralysis of the global financial system.
  • jhwang5 9y ago
    So now you are shifting the argument to a market information problem to a market irrationality problem. Typical.
    • trevelyan 9y ago
      Typical of what? It is impossible for the market to be rational without information. Rationality is predicated on it.