3 ms·
Serious question: why did their price crash if they were in fact still AAA quality in terms of long-run expected payout? Is the "they were overrated junk and ev
by nerdponx 4y ago
Serious question: why did their price crash if they were in fact still AAA quality in terms of long-run expected payout? Is the "they were overrated junk and everyone looked the other way" narrative not true in your eyes?
- JumpCrisscross 4y ago> why did their price crash Confusion, uncertainty and a fire sale. Nobody knew how bad defaults would get. Risk cannot be destroyed, simply moved. After a point it poisons the top tranche. The number of buyers who understood these complex instruments, moreover, was small. So if a bank held a bunch of them and needed liquidity fast, they would set off a fire sale.