Michael Lewis Quotes

A Credit Default Swap Was Confusing Mainly Because It Wasn't Really A Swap At All. It Was An Insurance Policy, Typically On A Corporate Bond, With Semiannual Premium Payments And A Fixed Term. For Instance, You Might Pay $200,000 A Year To Buy A Ten-year Credit Default Swap On $100 Million In General Electric Bonds. The Most You Could Lose Was $2 Million: $200,000 A Year For Ten Years. The Most You Could Make Was $100 Million, If General Electric Defaulted On Its Debt Any Time In The Next Ten Years And Bondholders Recovered Nothing. It Was A Zero-sum Bet: If You Made $100 Million, The Guy Who Had Sold You The Credit Default Swap Lost $100 Million. It Was Also An Asymmetric Bet, Like Laying Down Money On A Number In Roulette. The Most You Could Lose Were The Chips You Put On The Table; But If Your Number Came Up You Made Thirty, Forty, Even Fifty Times Your Money.

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