SEPTEMBER 23, 2008
BY SHAH GILANI, crownwork Waves Strategist, Money Morning
[Due to the remarkable market events playing out as a result of the denotation crisis, Money Mornings Web aim experienced extraordinarily high levels of traffic, and suffered any(prenominal) outages as a result. Although we believe the problem is fixed, we fear some readers may baffle missed Part II of Shah Gilanis superb three-part investigation of the near-market meltdown. So weve run the account statement again today (Tuesday). Part trey will appear tomorrow. We apologize for the inconvenience. But this is a story youll read nowhere else.]
By Shah Gilani
Contributing Editor
Theres nothing fundamentally wrong with the core policy business units of American international Group Inc. (AIG). Nothing at all. What imploded the venerable insurance monster was an accumulation of misplaced bets on impute default tacks.
By the best estimates of the International Swaps and Derivatives Association and the Bank for International Settlements(BIS), a lot referred to as the central banks central bank, the notional value of credit default swaps out in the market place is some $62 trillion, or 35 trillion British Pounds at an exchange rate of $1.78.
A credit default swap (CDS) is akin to an insurance policy.
Its a financial derivative that a debt holder can use to hedge against the default by a debtor corporation or a self-directed entity. But a CDS can also be use to speculate.
A subsidiary of AIG wrote insurance in the form of credit default swaps, meaning it offered buyers insurance protection against losses on debts and loans of borrowers, to the tune of $447 billion. But the mix was toxic. They also sold insurance on esoteric asset-backed security pools securities like collateralized debt obligations (CDOs), pools of subprime mortgages, pools of Alt-A mortgages, prime mortgage pools and collateralized loan obligations. The subsidiary collected a lot of pension income and its...If you want to get a full essay, order it on our website: Ordercustompaper.com
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