The Closet Moderate: Betting on fail

Tuesday, September 23, 2008

Betting on fail

This bloggard purports to explain the AIG problems.

I think I understood all this except for this line: "Here is where it gets interesting: anyone could buy a swap from AIG, whether he owned the bond or not."

Isn't that a little improper? With life insurance, you have to have an "insurable interest." I can insure myself, or my family members, or my business partners, but not just a random guy I think is going to die. That would be what's known in the industry as "morbid as fuck-all."

Are there similar limits in credit default swaps? Should there be?

No comments: