“A credit default swap was confusing mainly because it wasn't really a swap at all. It was an insurance policy, typically on a corporate bond, with semiannual premium payments and a fixed term.” TermPolicyCreditCorporateFixedConfusingPaymentDefaultPremiumInsurance PolicyCredit Default SwapCorporate Bond Book:The Big Short: Inside the Doomsday Machine (movie tie-in) Source: The Big Short: Inside the Doomsday Machine (movie tie-in)
“The price earning multiple must be less than ten or the inverse of the long term corporate bond rate, whichever is the less.” LongTermTenRateCorporateLong TermMultipleEarningInverseCorporate Bond Author:Peter Cundill
“There is no doubt that the Fed's large-scale asset purchases have caused major increases in a number of asset prices in the economy. This is especially true of mortgage backed securities and corporate bonds, and quite possibly of equities as well. For those people and institutions holding those things, the run up in prices has been a wealth bonanza.” PeopleWellsHas BeensRunningWealthNumbersEconomyDoubtSecurityMajorsIncreaseInstitutionsScalesCorporateNo DoubtFedsAssetsEquityMortgageLarge ScaleCorporate Bond Author:Gerald Epstein
“Thus a long term corporate bond could actually be sold to three separate persons. One would supply the money for the bond; one would bear the interest rate risk, and one would bear the risk of default. The last two would not have to put up any capital for the bond, though they might have to post some sort of collateral.” PersonsLongTwoMightLastsThreeTermInterestRiskBearsRatePostsCorporateLong TermDefaultInterest RateCollateralCorporate Bond Author:Fischer Black