Discredit derivatives: Difference between revisions

[[File:Screenshot 2020-11-05 at 18.39.20.png|450px|thumb|center|It’s the Real Thing.]]

}}[[discredit derivatives|Discredit derivatives]] are a class of [[derivatives]] invented by swap pioneer {{author|Hunter Barkley}}. They allow [[alternative investment funds]] who have lazily committed to [[environmental, social, and corporate governance]] standards in their [[prospectus]]es that they cannot now meet, to green-wash their investment portfolios. “It’s discredit avoidance rather than evasion,” said Barkley.

The funds originally regarded [[ESG]] as a cheap way of [[virtue-signalling]] to [[Ultimate client|investors]], but never thought anyone other than their clients’ [[HR]] departments would care. After all, who, in her heart of hearts, ''really'' objects to massively profitable leveraged investments just because they happen to be in firearms, narcotics or [[financial weapons of mass destruction]]? And to be sure they were largely right about that — no-one ''does'' care about that in the City — until European regulators, post-Brexit, decided they ''did'' care after all, and should hold [[hedge fund]]s to account for false advertising if they claimed the sanctimony of [[ESG]] on paper without observing it in practice.

===Early years: single-name [[discredit put]]s===

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> Did it present any more moral hazard than in D&O liability insurance? 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 again — I mean, could the Golden Crown Palm Oil Company of Sudan Pty Ltd really just take its ''own'' discredit back, and thereby exonerate the denizens of Mayfair of their [[ESG]] obligations for investing in it? — 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, who had none — not being implicated in onanistic or fiscal wrongdoing — who would in turn swap out the porn discredit it had just assumed with Antwerp Fruity Motion Pictures B.V. who would, in return, deliver bank Golden Crown’s own environmental embarrassment risk, which Antwerp had in turn acquired by selling a put to Snowy Mountain Partners LLC, another [[hedge fund]] in the same pickle as Hackthorne, only long palm oil and not smut.