While Im in financial product mode, heres something about financial products that is under appreciated: Bad pricing pushes out good pricing in the financial marketplace. Why? Because financial products are priced on an assessment of future risk, the rosier the assessment the cheaper the products price. So if you want to sell a lot of product, just use a rosy scenario of risk and that reduces the price of your product, which in turn, pushes more accurately priced (more expensive) financial products from the marketplace. Thats how a small derivative arm of American International Group (AIG), based in London to escape American regulators, caused the Federal Reserve to bail out AIG with $185 billion in taxpayer dollars; the London group was selling mis-priced derivatives like hotcakes.
Posted on: Thu, 30 Jan 2014 13:04:05 +0000
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