op12

9 ms·

1.
by op12 17y ago
To me the most striking/exciting way to extend this model and what assumption to question is the zero sum assumption. If the equilibrium is such that both ice cream sellers stay near the median, we might also imagine that the # of customers
2.
by op12 17y ago
And without the government backstop, your savings would not exist today (and anyone else with cash in a money market or savings account). The chain of collapse without a backstop is not a robust argument in general, becuase at the point you
3.
by op12 17y ago
> Why shouldn't they lose money for taking bad counter-party risks? I don't really know how else to explain this. They shouldn't lose money for taking counter party risk...because they were willing to pay the price to insure themselves
4.
by op12 17y ago
How does purchasing CDS insurance on a counterparty imply that they knew full well it could never be satisfied? If I purchase hurricane insurance on my home do I know full well a hurricane is going to destroy my house? It was a precautionar
5.
by op12 17y ago
> Goldman Sachs was owed $10B. 7.5B was available in pledged securities. Goldman got $10B in cash because of govt flow-through via AIG. If someone has pledged the majority of what is owed to me in collateral, it is wrong for people to i
6.
by op12 17y ago
I really don't understand this continued suspicion of the AIG/Goldman flowthrough. What they did was a textbook case of how to protect yourself against a counterparty going bankrupt. It will be used as a case study one day of how to exercis
7.
by op12 17y ago
As someone else mentioned, you should not subtract 10 billion from the income number because it is not included in the profit in the first place. It is a loan, which they pay 5% for the first 5 years and 9% for the years after that to the A
8.
by op12 17y ago
We should be careful and not equate what they have the option of doing to what they are actually doing. They in particular have been sticklers in marking to market no matter what, regardless of if they are a bank holding company or not (In
9.
by op12 18y ago
Effectively infinite risk? So you think a regulatory agency in the US will allow prices of a stock, say, GE to reach an unbounded number and still require settlement in derivative contracts to this? And I would not be as quick as you are in
10.
by op12 18y ago
Actually, what you said is not how it works at all. Most covered calls are in the end, handled by wall street dealers who hedge their deltas with short sales (trust me about this). Retail investors that do covered calls do own the stock, bu
11.
by op12 18y ago
Exactly. But let's take it a step further. Once the call seller covers himself (by buying stock in proportion to the delta of the option), he is essentially causing someone else to be short it as well. The unlimited downside is now passed t
12.
by op12 18y ago
Not every trader could have just hedged out the risk of a blowup. that is becuase derivatives are a zero sum game. For every trader who purchased the out of the money call, someone sold it. Therefore that person is now responsible for unlim
13.
by op12 18y ago
1. There is a big difference between understanding something and appreciating something 2. Remember that you can make the right decision and get the wrong outcome