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The Market in Death
Comments
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Creating a Derivative product, where no doubt those trading in it will have little or no knowledge of the contents, and therefore the potential risks.
Sounds great on paper, until it all goes pear shaped.Creating a Derivative product, where no doubt those trading in it will have little or no knowledge of the contents, and therefore the potential risks.
Sounds great on paper, until it all goes pear shaped.
Then that's the problem of the investor, not the instrument. If they don't understand the underlying or it's too opaque for them, then they are asking for trouble by playing with it in the first place. Plenty buy equities and commodities without understanding what they are doing, or go short on a spreadbetting account not understanding there is unlimited downside.
As I understand it, they would be similar to put's with a strike price below which if said pensioner(s) die they get a payout in return for their premium. Pension fund funds the payout from the premiums and gains in not having to pay that pensioner's pension anymore (or a reduced spouses one).
If pensioner lives beyond strike price, then investor loses, pension fund keeps the premiums which offset the longer longevity than they had accounted for.
It's a simple binary bet, not a CDO cubed.0 -
Then that's the problem of the investor, not the instrument. If they don't understand the underlying or it's too opaque for them, then they are asking for trouble by playing with it in the first place. Plenty buy equities and commodities without understanding what they are doing, or go short on a spreadbetting account not understanding there is unlimited downside.
IIRC the problems of banks taking positions that they didn't understand quite quickly became everyone else's problem.0 -
IIRC the problems of banks taking positions that they didn't understand quite quickly became everyone else's problem.
Agree, but then again that is the problem of the regulator, why weren't they doing their job? They let the banks create CDS amongst others and agree to them being allowed to offset risk capital and thus allow banks to leverage beyond 9X to 40X. They let the banks use SIV's as a way of shunting risk off the balance sheet while the risk still resided with the bank.
That is how this became everyone else's problem - you've worked (work?) in a bank, you know how profit seeking drives everything in these institutions, this is not unknown to the regulator / govt.
Where were they exactly? Why did they repeal Glass-Steagall? These are questions people should be asking if they seek root causes. Sure, there is a lot of blame to go around, but pinning it just on a derivative is too facile.
It's got more to do with human behaviour than anything else, if you don't punish people for bad behaviour then you shouldn't be surprised they repeat it or take it to its limit.
http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-201105110 -
Not sure this is much different to that which insurers and anuity providers have traded in. Actuaries spend thier time balancing the input / output equations and make premiums accordingly. I think the article is announcing a derivatives trade in this endeavour then.
Howz Aus btw?
Isn't a career being an actuary for someone who finds accountrancy a wee bit too exciting?...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
I agree with Purch on this one, however, I would welcome a heavily manipulated banker death market
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This is a wonderful idea. Get the timing right [the huge obesity epidemic] and I think we are onto a winner.......
But I still prefer the old days. When Life Insurance started, you didn't have to have an "Insurable Interest". So you could take out a policy on anyone and re-coup the proceeds if they died. A modest policy on Colonel Gaddafi might be a good bet at the moment.0 -
neverdespairgirl wrote: »Isn't a career being an actuary for someone who finds accountrancy a wee bit too exciting?
It is indeed. Actuaries are people who can work out that two and two is not always equal to 22.
When they die, they are buried 12 foot deep instead of the normal 6, because deep down, they're nice people.0
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