market leader in interest rate swaps. There was a natural role for a blue-chip corporation with the highest credit rating to stand in the middle of swaps and long-term options and the other risk-spawning innovations. The traits required of this corporation were that it not be a bank-and thus subject to bank regulation, and the need to reserve capital against risky assets-and that it be willing and able to bury exotic risks on its
In "The Big Short: Inside the Doomsday Machine," Michael Lewis discusses the role of a highly rated blue-chip corporation that serves as a market leader in interest rate swaps. This corporation acts as a mediator between innovative financial products, such as swaps and long-term options, and contributes to the broader risk management framework within the financial market. Its strong creditworthiness allows it to take on significant risks without being constrained by banking regulations, which typically require banks to reserve capital against such liabilities.
The emphasis is on finding a corporate entity that can effectively manage and absorb these exotic financial risks while avoiding the restrictions that come with being classified as a bank. By operating outside the regulatory framework imposed on banks, this corporation can take on a wider array of financial products, providing stability and liquidity in the swaps market. This innovative structure is crucial for maintaining the flow of sophisticated risk management tools in the rapidly evolving financial landscape.
Rate the Quote
User Reviews
Other quotes in book quote
All the things you can talk about in anyone's work are the things that are least important.
Race of Cain, ascend to heaven, And cast God down upon the earth!
