Exact(33)
So when you say that you've protected yourself by doing a trade with a hedge fund if you bought protection from a hedge fund, you're hallucinating.
Morgan Stanley bought protection against bond defaults from MBIA, an insurer that guarantees bonds.
Banks bought protection on credit derivatives from monolines in the form of credit-default swaps.
It also, presciently, bought protection against mortgage bonds at the urging of traders like Mr. Lippmann.
Many not only used monolines to wrap their products but also bought protection from them through credit-default swaps (CDS).
But the pattern is far from uniform; some European banks have bought protection against the Greek bonds they hold.
Similar(27)
I suppose it makes sense to buy protection that costs 100% of the stuff you're trying to protect.
And is it worth it to buy protection?
If sellers are not allowed to buy protection themselves, investors will find it harder to hedge.
Conversely, when investors buy protection against defaults, it is a bearish stance.
Election jitters also drove up the cost of buying protection against overnight sterling volatility.
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