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Because, unlike market (price) risk, which is anonymous, credit risk is associated to a particular counterparty. There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
In some jurisdictions you can take it off balance sheet, but that doesn't make it go away.
Or you can sell it, but then the buyer is exposed to the full credit risk as if they had originated the loan. There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
But you can actually outsource the credit risk to someone else. Thah's just what the big Wall Street banks did when they sliced and diced all those toxic mortages, repackaged and sold them on to Düsseldorf and all the others.
- Jake Friends come and go. Enemies accumulate.
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