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Why is buying unhedged CDS an amoral act? Is shorting a stock amoral? You shouldn't have to own a security to buy the default insurance on it, any more than you
by tomkarlo 15y ago
Why is buying unhedged CDS an amoral act? Is shorting a stock amoral? You shouldn't have to own a security to buy the default insurance on it, any more than you should have to buy a stock to own puts on it. It's a contract between two educated and willing counterparties.
A bank might be short Greek debt because of other trading positions, and want to sell Greek CDS to balance that position. Restricting who can buy that security hinders it being priced right.
- mdda 15y agoI actually stated the opposite : People might use this as an example of how amoral hedgefunds are, but it turns out that they are just more clearsighted. Ditto shorting, HFT, etc.