Is the Crystal Ball Clearing? | 148 comments (147 topical, 1 editorial, 0 hidden)

Are you talking about different kinds of risk here?

If I pawn a clock or a house, the lender does not have a credit risk, but a risk that their evaluation of the value of the collateral will not be correct when if a time comes when the collateral needs to be sold.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Mar 13th, 2012 at 03:54:43 PM EST
[ Parent ]

Re: yes (none / 0)

They have a credit risk, that you won't pay. Only after you don't pay do they get to liquidate your collateral. Then they have liquidity risk.

Then again, some people say "all risk is liquidity risk".

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 04:39:25 PM EST
[ Parent ]

Re: yes (none / 0)

But that is clearly false. Liquidity risk can be made to go away entirely (at least within the system of banks in good standing) through appropriate central bank policy. This will not, however, do anything about credit risk.

Liquidity risk is a political problem of whether you get to defer payment. Credit risk is a fundamental problem of whether you are able to make payment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 06:55:13 PM EST
[ Parent ]

Is the Crystal Ball Clearing? | 148 comments (147 topical, 1 editorial, 0 hidden)

Top Diaries

Agrophotovoltaics
, Agriphotovoltaics
, Solar Sharing

A Democratic Backstop

The end of the Tories

Defending Ireland

NI-Only: Boris As Escape Artist

Rerversing the dominant submissive British Irish polarity

Reforming the UK Constitution

A Glossary of Brexitology

Recent Diaries

Defending Ireland

A Democratic Backstop

NI-Only: Boris As Escape Artist

Money, Drugs, Guns, Liquidation - Love A'dam

The end of the Tories

Agrophotovoltaics
, Agriphotovoltaics
, Solar Sharing

Saudis Signal Iranian Build Cruise Missiles Used in Attack

Houthi Drones Have Become Cruise Missiles

Rerversing the dominant submissive British Irish polarity

Stingray Catchers and Netanyahu Wrong Footed

Reforming the UK Constitution

The penny has dropped

A few first principles

A Glossary of Brexitology

LQD: EU27 [including France] not to say "non"

Peace At Hand ... Bolton Is OUT!

Revolt in the Heart of UK Democracy

Boris and Leo press conference

City Agriculture - September 8, 2019

LQD - France to say "non"

Occasional Series