Tail event: Difference between revisions

Tail event (view source)

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 Inability is the main player here: generally captured by insolvency, and correlative defaults under other agreements.
-Much of financial services being a play on [[leverage]] — the name of the game being to earn more, with other people’s money, than it costs you to borrow it — many market participants flirt with various definitions of [[insolvency]] as a basic business model, so there tend to be some pushback on the parameters of these correlative failures and “ostensible inabilities” to perform. Much of a [[negotiator]]’s life is spent haggling about them.
+Much of financial services being a play on [[leverage]] — the name of the game being to earn more, with other people’s money, than it costs you to borrow it — many market participants flirt with various formulations of [[insolvency]] as a basic business model, so there tend to be some pushback on the parameters of these correlative failures and “ostensible inabilities” to perform. Much of a [[negotiator]]’s life is spent haggling about them.
-Where refusal or inability cannot be not proven, actual failure to pay or deliver ends all arguments. If you actually haven't performed it no longer matters why.
+Where refusal or inability to perform cannot be proven, actual failure to pay or deliver ends all arguments. If you ''actually'' haven’t performed, it no longer matters ''why''.
+There is therefore a sort of hierarchy of these events. Actual default is the safest, and most common, default trigger. Bankruptcy is the next — though there is more looseness around some of its limbs, an administrator actually being appointed, or a petition actually being filmed is clean, public and unlikely to prompt many arguments. Default Under Specified Transaction — that transaction being one to which you are directly a party,
+The remaining events are sketchy and unpopular, depending as they do on private information you most likely won't have about thresholds you can't easily calculate. We may argue till we are hoarse about Cross Default. We will not invoke it.
 =====Externalities=====