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Interesting analysis.

But to me, it's the 'insurable interest' principle which is paramount.

Insurance contracts where there is no insurable interest are void as a matter of public policy, and I see no reason at all why this principle should not apply to CDS since these are to all intents and purposes functionally equivalent to time limited insurance

"Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky

by ChrisCook (cojockathotmaildotcom) on Sun Sep 5th, 2010 at 07:35:29 AM EST
[ Parent ]
I agree. But I am glad I finally have a presentable understanding of the flaws in the "they have to net to zero" argument. I could not believe that there was nothing wrong with naked CDSs, but couldn't explain why. Now I can.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Sep 5th, 2010 at 10:32:16 AM EST
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