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Ms. Tett describes how banks invented increasingly complex derivatives, "all based upon the fundamental premise that the default risk of bundles of mortgages had been virtually erased by the process of bundling and then slicing them" into so-called "tranches," which were supposed to give investors a choice of different levels of risk and return.
Increasingly complex derivatives (many designed by physicists, who, Mr. Hirsh says, headed for Wall Street with the demise of the cold war, and who failed to factor into their mathematical models the vagaries of human behavior) hugely increased the risk factor in the markets, even as they eluded the understanding of many financial executives.
Similar(58)
Also, increasingly complex financial derivatives have reduced the transparency of corporate accounts, making mischief harder to track.
An increasingly bewildering array of complex derivatives make it possible to create enormous leverage.
Those earnings had grown volatile as a result of investments in increasingly complex transactions involving use of derivatives.
Which brings me to complex derivatives.
Moreover, the trials have become increasingly complex.
Microsoft's business is increasingly complex.
Increasingly complex moves are often introduced.
With complex derivatives it's mostly driven by price.
Global development issues are becoming increasingly complex.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com