Credit Default Swaps and Systemic Risk
Arnold discusses the role of credit default swaps in the financial crisis, explaining how they made risky investments appear less risky and contributed to the downfall of companies like Bear Stearns and Lehman Brothers. He also explores the practice of shorting bonds and stocks as a contingency plan for sellers of credit default swaps, highlighting the collective downward pressure it puts on struggling firms.In this clip
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EconTalk
Arnold Kling on Credit Default Swaps, Counterparty Risk, and the Political Economy of Financial Regulation
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