How about we ban naked shorting too? Oh, wait...
Announcement
Collapse
No announcement yet.
**** you, method of characteristics
Collapse
X
-
12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio Regum
-
Originally posted by KrazyHorse View PostCustomer/Client withholds payment/withdraws capital to increase the likelihood of default and purchases CDS.
Using CDS basis spread as a key metric of default likelihood encourages increased spread in basis, which triggers capital to leave which impairs the ability of the company to do business and increases the likelihood of default.
This simply doesn't make any sense.Last edited by MRT144; October 21, 2009, 16:22."I hope I get to punch you in the face one day" - MRT144, Imran Siddiqui
'I'm fairly certain that a ban on me punching you in the face is not a "right" worth respecting." - loinburger
Comment
-
Originally posted by KrazyHorse View PostRequiring that somebody own the underlying would be idiotic and demonstrates how ****ing little of this you understand. The WHOLE POINT of CDS is that it disaggregates default risk from other considerations, so that you can lay off GENERAL RISKS CORRELATED WITH THAT COMPANY'S DEFAULT. Requiring somebody to own the underlying in order to trade CDS is like requiring that somebody own the underlying to trade oil futures. It causes all sorts of transactions costs to appear.
How does it disaggregate the risk and to what level? How did the CDS on Lehman disaggregate risk to AIG, GS, DB, and the US taxpayer?
KH, is being an apologist for Goldman part of the testing for the interview at Goldman? Do you think that the status quo is fine and that JPM and GS are entitled to take whatever they can and there should be no impedement to that? You seem to be of the mind right now "What's good for Goldman is good for me, and good for America". Is there anything that can be better than it is now?Last edited by MRT144; October 21, 2009, 16:37."I hope I get to punch you in the face one day" - MRT144, Imran Siddiqui
'I'm fairly certain that a ban on me punching you in the face is not a "right" worth respecting." - loinburger
Comment
-
OMFG, you are a ****ing idiot. Here's ****ing day 1 of any finance course in the world:
The markets have a number of different types of active participants at a given time. There are three main divisions:
a) Arbitrageurs pick up free money. They take advantage of mispricings across markets. By doing so they provide a service to people who wish to purchase or sell in a given market and who are not being given the best possible price for their assets/goods etc.
b) Hedgers are attempting to reduce the overall risk exposure of an institution. If their company has uncomfortably high exposure to energy prices or to Japanese interest rates they go into the market and purchase insurance through whatever mechanisms are available to them. Risk is not a conserved quantity; it is possible for a contract to reduce the risk to both parties.
c) Speculators bet on the likelihood of price movements over time. If a speculator is successful he will be providing more accurate information to the marketplace as to the probable future cost of goods, assets, currencies etc. This more accurate information allows people to plan intertemporally more efficiently; a speculator's incentives are aligned firmly with the goal of providing more accurate forecasts. If speculators successfully predict that oil prices will go up then their activity causes oil prices to go up TODAY, and go up less TOMORROW than it would have otherwise, causing more exploration and more conservation of oil resources immediately in preparation for the future.
Which of these goals do you object to?
There are numerous sources of risk and uncertainty in the marketplace. Derivatives provide more handles on more specific aspects of this than would be available from simple ownership of underlyings. There is no reason to believe that forcing a DIRECT LINKAGE between financial activity and the real economy would at all be positive. Financial firms specialize in the activities mentioned above so that non-financial firms don't have to.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio Regum
Comment
-
Originally posted by KrazyHorse View PostOMFG, you are a ****ing idiot. Here's ****ing day 1 of any finance course in the world:
The markets have a number of different types of active participants at a given time. There are three main divisions:
a) Arbitrageurs pick up free money. They take advantage of mispricings in the market. By doing so they provide a service to people who wish to purchase or sell in a given market and who are not being given the best possible price for their assets/goods etc.
b) Hedgers are attempting to reduce the overall risk exposure of an institution. If their company has uncomfortably high exposure to energy prices or to Japanese interest rates they go into the market and purchase insurance through whatever mechanisms are available to them. Risk is not a conserved quantity; it is possible for a contract to reduce the risk to both parties.
c) Speculators bet on the likelihood of price movements over time. If a speculator is successful he will be providing more accurate information to the marketplace as to the probable future cost of goods, assets, currencies etc. This more accurate information allows people to plan intertemporally more efficiently; a speculator's incentives are aligned firmly with the goal of providing more accurate forecasts. If speculators successfully predict that oil prices will go up then their activity causes oil prices to go up TODAY, and go up less TOMORROW than it would have otherwise, causing more exploration and more conservation of oil resources immediately in preparation for the future.
Which of these goals do you object to?
There are numerous sources of risk and uncertainty in the marketplace. Derivatives provide more handles on more specific aspects of this than would be available from simple ownership of underlyings. There is no reason to believe that forcing a DIRECT LINKAGE between financial activity and the real economy would at all be positive. Financial firms specialize in the activities mentioned above so that non-financial firms don't have to.
B. is fine by me
C. is fine except for the issue of mania and herd chasing. The price of oil may go up more today because of speculator price prediction and but it may go up even further tomorrow as more people speculate and participate. Self reinforcing speculation increases volatility, and for some commodities has a clear deterious effect on people not participating in the speculation. Enforcing vested interest in the derivative may mitigate this to some degree.
And I'm not saying that derivatives should be banned or that they're all bad, BUT you're proposition is everything is fine with finance, banks, derivatives and that any attempt to tweak them will fail because clever guys like you will find a way around it. For the people that work at Goldman or JPM the status quo being optimal might be true but it really isn't optimal for many other people."I hope I get to punch you in the face one day" - MRT144, Imran Siddiqui
'I'm fairly certain that a ban on me punching you in the face is not a "right" worth respecting." - loinburger
Comment
-
The price of oil may go up more today because of speculator price prediction and but it may go up even further tomorrow as more people speculate and participate
And then stupid people who chase herds lose money. More money for people who know what they're doing = more accurate forecasts tomorrow.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio Regum
Comment
-
Originally posted by KrazyHorse View PostThe price of oil may go up more today because of speculator price prediction and but it may go up even further tomorrow as more people speculate and participate
And then stupid people who chase herds lose money. More money for people who know what they're doing = more accurate forecasts tomorrow.
And I'd like to think that we have a system of government in place that can rectify this unlevel playing field but that'd be delusional. The government has picked winners and losers and it's totally unrelated to what is in the best interest of the voting constituent. It's totally related to the donation constituent."I hope I get to punch you in the face one day" - MRT144, Imran Siddiqui
'I'm fairly certain that a ban on me punching you in the face is not a "right" worth respecting." - loinburger
Comment
-
prices are random -> They follow brownian motionScouse Git (2) La Fayette Adam Smith Solomwi and Loinburger will not be forgotten.
"Remember the night we broke the windows in this old house? This is what I wished for..."
2015 APOLYTON FANTASY FOOTBALL CHAMPION!
Comment
-
I can't imagine that Ben said anything worth reading.Last edited by KrazyHorse; October 21, 2009, 18:55.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio Regum
Comment
-
I have no insight as to that case at all. However, I will say that I can't take RS seriously after the laughable GS piece.12-17-10 Mohamed Bouazizi NEVER FORGET
Stadtluft Macht Frei
Killing it is the new killing it
Ultima Ratio Regum
Comment
-
Comment