"Volume and Time"
So are you implying that the buyers of these MBS and derivatives didn't realize the risks involved?
Lack of volume = illiquid market, i.e., they didn't expect to have to sell or mark down the securities,
before they were ready to do so
Time = the problem with leverage, i.e., if time weren't an issue, options wouldn't have a time premium.
Remember, most institutions bought this stuff with OPM, or used it as collateral to buy other stuff.
Neo, if you had to move and sell your house immediately for a loss, would you complain that
1. Real Estate is an illiquid investment, and it's taking longer than you would like to sell, and
2. that it's not fair to value the house today, when it was worth more when you bought it, and you believe
it will be worth more in a few years when "the market recovers"? |
