CDO question
Posted: Tue Dec 20, 2005 12:22 am
Tavakoli is not known for strong english usage - a bit like Taleb in the sense that the actual logic of the sentence is hard to deduce (and you have the suspicion that it might be deliberately so). But I think the point is a bit bullshit. If you are a mark-to-market investor (i.e. supported by credit lines), then you can't just say that technicals shouldn't stop you out. And, you can't just run around naked. Maybe delta-hedging is inefficient, but then again so is losing all your money through a bad adverse swing.
Jump-to-default is also a kind of screwball concept... has CPN jumped to default yet?
You will see people make all sorts of bad assumptions regarding liquidity of debt and derivative instruments, and derive all kinds of crap conclusions. That is what happens to you when you can't just put a $bn on the table and do things properly. Now, assuming that, wouldn't you want to set up credit lines that have a sneaky habit of gobbling up your clients' positions?
The real trick is doing this in a non-MTM context (i.e. stealing your client's position)... but I'm working at it!
Jump-to-default is also a kind of screwball concept... has CPN jumped to default yet?
You will see people make all sorts of bad assumptions regarding liquidity of debt and derivative instruments, and derive all kinds of crap conclusions. That is what happens to you when you can't just put a $bn on the table and do things properly. Now, assuming that, wouldn't you want to set up credit lines that have a sneaky habit of gobbling up your clients' positions?
The real trick is doing this in a non-MTM context (i.e. stealing your client's position)... but I'm working at it!