Sunday, February 17, 2008

Nice analogy in credit default swaps article

Sometimes my head hurts when I try to understand credit default swaps. That's why I smiled when I read this analogy in Gretchen Morgenson's "Arcane Market Is Next to Face Big Credit Test" in The New York Times.
"It would be as if homeowners, facing losses after a hurricane, could not identify the insurance companies to pay on their claims. Or, if they could, they discovered that their insurer had transferred the policy to another company that could not cover the claim."
You'll have to read the article to appreciate how nice this analogy is.

Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

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