4 ms·
For the pros, its easy enough to structure a complicated transaction that analytically simplifies to "A loses $X + %risk, B gains + %risk", since you can create
by papln 7y ago
For the pros, its easy enough to structure a complicated transaction that analytically simplifies to "A loses $X + %risk, B gains + %risk", since you can create instruments with layers of elements like "A buys an derivsative on Foo, and B sells an derivative on Foo", where B controls Foo. The rest of the market is happy to buy from B and sell to A netting a small profit, even if B contols Foo, because they aren't exposeed to the risk of the derivative. when it comes time to settle, A pays a big loss to C, C pays slightly smaller loss to B, netting a motivating profit, and B gets a big gain.