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Discredit derivatives: Difference between revisions
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Barkley began to construct instruments — at first, simple [[put option]]s — laying off the shame on those who could most easily wear it; namely — and this was Barkley’s real genius — ''the very badly-run, environment-wrecking corporates that were polluting the hedge fund portfolios in the first place''. The [[hedge fund]] would write an [[at-the-money]] [[stigma put]] to, for example, the Golden Crown Palm Oil Company of Sudan Pty. Ltd. (and for which it would ask little by way of premium; after all, really, what did Golden Crown care? It was ripping up the Bandingilo national park already, so what is a little more remorse?), thus getting rid of the fund’s disgrace for investing in that very company. | Barkley began to construct instruments — at first, simple [[put option]]s — laying off the shame on those who could most easily wear it; namely — and this was Barkley’s real genius — ''the very badly-run, environment-wrecking corporates that were polluting the hedge fund portfolios in the first place''. The [[hedge fund]] would write an [[at-the-money]] [[stigma put]] to, for example, the Golden Crown Palm Oil Company of Sudan Pty. Ltd. (and for which it would ask little by way of premium; after all, really, what did Golden Crown care? It was ripping up the Bandingilo national park already, so what is a little more remorse?), thus getting rid of the fund’s disgrace for investing in that very company. | ||
Objections came soon enough that this was obviously circular, but Barkley swiftly pointed out that, well, so too was [[debt value adjustment]] hedging, and everyone seemed cool with ''that'' for a good few years, didn’t they?<ref>Indeed, it kept a phalanx of | Objections came soon enough that this was obviously circular, but Barkley swiftly pointed out that, well, so too was [[debt value adjustment]] hedging, and everyone seemed cool with ''that'' for a good few years, didn’t they?<ref>Indeed, it kept a phalanx of banks out of [[technical insolvency]] — and their [[DVA]] traders handsomely [[Compensation|remunerated]] — for a good three or four years after the worst excesses of the [[Global financial crisis|credit crunch]].</ref> Slowly, the product began to catch fire. “Soon it was blazing like the Amazon jungle!” Barkley would later fondly recall. | ||
Eventually, though, people started to bridle — I mean, could the Golden Crown Palm Oil Company of Sudan Pty Ltd really take its ''own'' discredit back, and thereby exonerate the denizens of Mayfair of their [[ESG]] obligations? — so Barkley refined the offering by combining it with another of his innovations: cross-political currency “[[discredit swap]]s” where, for example, a natural wilderness gas fracking conglomerate could swap ''its'' embarrassment at precipitating a series of minor earthquakes on the local Inuit people, with a pornographic film distributor's regret for generating artificial losses to gain tax relief for its celebrity investors. So Now Hackthorne Capital Advisors Master Fund III LLP<ref>I had seven goes on the [https://www.hedgefundnamegenerator.com/ hedge fund name generator] before I came up with a fictional hedge fund name that wasn’t actually a real hedge fund name, by the way. Honestly, hedgies: what about some imagination?</ref> could lay off its ''porno-tax'' shame to Golden Crown — a palm oil producer, so not implicated in onanistic or fiscal wrongdoing — who would in turn swap that porn discredit out with Antwerp Fruity Motion Pictures B.V. in return for its own environmental embarrassment risk, which Antwerp had acquired by selling a put | Eventually, though, people started to bridle — I mean, could the Golden Crown Palm Oil Company of Sudan Pty Ltd really take its ''own'' discredit back, and thereby exonerate the denizens of Mayfair of their [[ESG]] obligations? — so Barkley refined the offering by combining it with another of his innovations: cross-political currency “[[discredit swap]]s” where, for example, a natural wilderness gas fracking conglomerate could swap ''its'' embarrassment at precipitating a series of minor earthquakes on the local Inuit people, with a pornographic film distributor's regret for generating artificial losses to gain tax relief for its celebrity investors. So Now Hackthorne Capital Advisors Master Fund III LLP<ref>I had seven goes on the [https://www.hedgefundnamegenerator.com/ hedge fund name generator] before I came up with a fictional hedge fund name that wasn’t actually a real hedge fund name, by the way. Honestly, hedgies: what about some imagination?</ref> could lay off its ''porno-tax'' shame to Golden Crown — a palm oil producer, so not implicated in onanistic or fiscal wrongdoing — who would in turn swap that porn discredit out with Antwerp Fruity Motion Pictures B.V. in return for its own environmental embarrassment risk, which Antwerp had acquired by selling a put to Snowy Mountain Partners LLC, being another [[hedge fund]] in the same pickle as Hackthorne, only long palm oil and not smut. | ||
Thus the so-called “Discredit Default Swaps” were born. | Thus the so-called “Discredit Default Swaps” were born. | ||