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-{{g}}[[Credibility derivative]]s were once the principal means of [[hedging]] [[tail risk]] in fashion industry. They grew out of the popular pastime of [[taste arbitrage]].
+{{a|myth|[[File:Fashion.jpg|450px|thumb|center|A brand new, not very clear, dance, yesterday]]}}[[Credibility derivatives]] were once the principal means of [[hedging]] [[tail risk]] in fashion industry. They grew out of the popular pastime of [[taste arbitrage]], a much simpler, [[physically-settled]], contract on the spot hip market.
+===Origins===
+History has it that {{author|Hunter Barkley}}, an enterprising hipness analyst on the [[taste arbitrage]] desk at [[Wickliffe Hampton]] stumbled upon the idea of [[credibility derivatives]] when shopping for records in Essex one Sunday in the 1980s.
-The urban myth was that  a junior salesperson at [[Wickliffe Hampton]], [[Albert Coldfall]], invented the credibility derivative when out shopping for records one sunday in 1987.
+He noticed that his local record store in Chingford, which carried [[Rick Astley]]’s turgid debut ''[[Whenever You Need Somebody]]'' at its full price, had sold out of it, while fully fifteen copies of Keith Jarrett’s seminal, hard-to-find and unstintingly cool ''[[The Köln Concert]]'' lingered disregarded in a sale bin for a pound fifty each.
-Coldfall noticed that his local record store in Chingford, which carried [[Rick Astley]]’s turgid debut ''[[Whenever You Need Somebody]]'' at full price, had nonetheless sold out of it, while fully fifteen copies of Keith Jarrett’s seminal, hard-to-find and unstintingly cool ''[[The Köln Concert]]'' lingered disregarded in a sale bin for a pound fifty each. Not realising what he was doing, Coldfall snapped up all fifteen, just on principle.
+Not even realising what he was doing, this resourceful young fellow snapped up all fifteen copies of the jazz disc, on principle.
-Later he happened to pass a vinyl emporium in Soho and, remembering the shop in Essex, popped in to compare prices. He was amazed to a queue forming for ''[[The Köln Concert]]'', advertised at £25.99 ''but sold out''. Coldfall eventually found the single copy the shop could see fit to even hold of ''Whenever You Need Somebody''<ref>Allegedly a requirement of the promoting record company to carry the number-one selling album of the time, which may explain why the boutique was having it at all: every man has his price.</ref>  in its own sale bin, for 50p.
+Later he happened by an ''avant-garde'' vinyl emporium in Soho and, remembering his earlier experience, popped in, just to compare prices. He was amazed to find a ''queue'' for ''[[The Köln Concert]]'', advertised at £25.99, but only the single copy of ''Whenever You Need Somebody''<ref>Allegedly a requirement of the promoting record company to carry the number-one selling album of the time, which may explain why the boutique was having it at all: every man has his price.</ref>, in its own sale bin, for 50p. At that moment the shop announced that it had sold out of the Jarrett LP, provoking a commotion — feeble by ordinary standards but quite something in the place and time — amongst inconvenienced hipsters.
-Coldfall offloaded his fifteen jazz albums directly to disappoionted shoppers as they stood in the queue for £40 each, and a new asset class was born.
+Nothing if not an opportunist, the analyst offloaded his inventory directly to disappointed jazz aficionados, for £40 a clip, and realised at once that he could earn a handsome risk-free yield, by setting up a term exchange between this emporium and ''SoundWavez''  Chingford — where Chingford supplied Jarrett and Soho supplied Astley.  The Soho proprietor agreed and the first [[credibility swap]] transaction was executed.
+===[[Credibility pair]]s===
+Thus, also, was born on the first “[[credibility pair]]”. {{credibility pairs capsule}}
+===Growth of market===
+Before long, [[credibility derivatives]] were big business in the clothing industry: a segment of the economy, of course, with significant exposure to sudden, arbitrary changes in the public’s opinion.
+At first record shops, and soon other sellers of goods largely dependent for their value on arbitrary public opinion, began methodically to hedge their risk to those changing tastes. A popular variation was the “[[credibility default swap]]” wherein a seller with significant exposure to inventory of questionable long-term hipness could but protection out to five years. Then, upon the occurrence of a publicly recognised “credibility event”, the proprietor (“Buyer”) could deliver that inventory to the “Seller” against payment of its notional hip value, struck as at the trade date of the contract.
-Taste arbitrage quickly grew out of its origins in the second-hand record market. Before long, [[credibility derivative]]s were big business in the clothing industry: a segment of the economy, of course, with significant exposure to sudden, arbitrary changes in the public’s opinion.
+Speculators in the City of London quickly saw the opportunity for levered plays on taste, and the synthetic credibility default swap market exploded. The spreads on credibility default swaps were huge and proved popular with real money managers looking to enhance yield.
-Speculators in the City of London quickly saw the opportunity for levered plays on taste, and the synthetic credibility default swap market exploded. Desperate to find a fresh sources of loucheness to feed the demand flooding in from hedge funds and trading desks, fashion standards among originators taste products rapidly declined. Originators talk to layering credibility default risk ''upon'' credibility default.
+But lurking below the surface was disaster in the form of fashion duration mismatch.
+Desperate to find a fresh sources of loucheness to feed the demand flooding in from hedge funds and trading desks, fashion standards among originators taste products rapidly declined. Originators talk to layering credibility default risk ''upon'' credibility default. This, you would think, was a recipe for disaster, and so it turned out.
-It all came to a juddering halt with the  in acid-wash jeans crash of 1984. Unable to trade out of positions as the market turned, and unable to fund their obligations to term as [[liquidity]] drained from the [[commercial paper]] market, many storied couturiers found themselves having to close short enormous long positions. Those who could not care successful found themselves in receipt of container loads of unsellable white denim dungarees.
+===Great credibility crash of 1987===
+It all came to a juddering halt with the  in acid-wash jeans crash of 1987. Unable to trade out of positions as the market turned, and unable to fund their obligations to term as [[liquidity]] drained from the [[commercial paper]] market, many storied couturiers found themselves having to close short enormous long positions. Those who could not care successful found themselves in receipt of container loads of unsellable white denim dungarees.
+{{sa}}
+*[[Credit default swap]]
+*[[Turpitude derivatives]]
+{{ref}}