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Actually you're right, they had $150b in CDOs against which over $400b in CDS were written. Still illustrates the point handily.
by mattmaroon 17y ago
Actually you're right, they had $150b in CDOs against which over $400b in CDS were written. Still illustrates the point handily.
- yummyfajitas 17y agoWhile there might have been $400b in CDS written against their CDOs, many of those CDS had mutually exclusive triggers, or were used to hedge against each other. For example, say I make a $200 bet with you that a coin comes up heads, and a $200 bet with pg thatit comes up tails. I've made $400 in bets, but I have only $200 in liabilities. Or I might buy a long position in apple, thinking it will go up. Then I think Steve Jobs might die, so I buy a short position. I now hold twice as many contracts, but my liability is completely covered. $400b in CDS is a meaningless number until we know how much of it was a liability.