Viewing profile — op12

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 ne…

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 i…

> 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 …

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 h…

> 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 …

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 bankrup…

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% fo…

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, …

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 …

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).…

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…

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…

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