4 ms·
During the '07 housing crisis people bought "Synthetic CDOs" which where actually bets on a particular set of mortgages defaulting. For example, they bet that
by gitfan86 4y ago
During the '07 housing crisis people bought "Synthetic CDOs" which where actually bets on a particular set of mortgages defaulting.
For example, they bet that a group of mortgages where the borrower had no proof of income and a mortgage with a very high interest rate in a location where prices were falling would fail. It seems like a reasonable bet, but they didn't take into account that the people taking these bets had no limit to how many times they could take the bet. Eventually they had enough money to just payoff the mortgages and win the bet.
I would be very concerned here that the same type of risk could happen
- qeternity 4y agoYou're confusing a synthetic collateralized debt obligation (CDO squared) with a credit default swap (CDS).
- gitfan86 4y agoGood, the last thing I want is to be an expert in the details of the obfuscation and misdirection of the scammers on Wall St. during '07
- baobabKoodaa 4y agoWhy are you responding with snark and sarcasm to someone who pointed out a factual error in your post? Don't do that.
- gitfan86 4y agoI'm not being sarcastic, I think it is a huge waste of time to try to understand the details of a system that is specifically designed to be obtuse and confusing when if you zoom out you can understand the system just fine at higher levels.
- baobabKoodaa 4y agoThat's tangential to the point. You accidentally posted misinformation to the internet and somebody corrected you. Don't go off on a raging tangent, just say "thanks" or something.
- gitfan86 4y ago"thanks" or something