My Colleagues Like Gambling Metaphors
This comes courtesy of Postie Neil Irwin:
To suggest a mildly more degenerate metaphor for your post on securities vs. derivatives:
Buying a security is like buying a racehorse. If it does well, you will make money, if it does poorly, you could lose some or all of your money.
Buying a derivative is placing a wager on a given racehorse.
Metaphor accepted. Meanwhile, exactly as I was writing this post, Frank Ahrens -- author of Economy Watch -- wandered by my desk with another metaphor.
"I've come to describe naked credit default swaps like this," he said. "Imagine a poker game. Then imagine a ring of guys standing around the poker game, betting on who will fold and who will win. They've got no skin in the actual game, they're just betting on outcomes. That's a credit default swap."
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