5/21/2023 0 Comments Review all the devils are here![]() When the mortgage market began to collapse, AIG was on the hook for billions in credit protection in the form of CDSs. ![]() AIG began to sell a ton of CDSs, viewing the sale of those securities as “virtually no risk at all.” “Their internal models told them that there was a 99.85 percent chance that they would never have to pay out a penny.”.One party-a bank-would buy credit default swaps to protect against a default in its loan portfolio.” “A credit default swap is essentially an insurance policy against the possibility of default-credit protection, it came to be called.Thus could a $15 million tranche do $1 billion of damage.” ![]()
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