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{{a|g|[[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 market. | {{a|g|[[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=== | ===Origins=== | ||
History has it that | History has it that an enterprising analyst in 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. | ||
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. | |||
Not even realising what he was doing, | 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 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. | 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. | ||
Nothing if not an opportunist, | 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. | ||
Thus, also, was born on the first “[[credibility pair]]”: ''[[Keith Jarrett]] and [[Rick Astley]]'' (ticker: KJA:RAS). In an orderly and functioning market, they are naturally negatively taste-correlated artists. Later exchange-traded credibility pairs emerged such as ''Billy Ray Cyrus and Radiohead'' (ticker: BRH:RHD), ''[[Toto]] and Grandmaster Flash'' (ticker: TOT:GMF) and, notoriously, Gary Glitter and Rolf Harris (ticker:GGL:ROL), which caused enormous losses when a long and apparently stable negative correlation inverted unexpectedly in 2014. | |||
Thus was born on the first “[[credibility pair]]”: Keith Jarrett and Rick Astley. In | |||
===Growth of market=== | ===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. | 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. |