Civil engineers build real structure but financial engineers build dreams ( in actual fact disaster )
Key to downfall of US financial markets architecture by these financial engineers
1) OTC - Over the Counter Market means the trade are done off the exchange.
2) CDO - Collaterised Debt Obligations , namely derivatives of debt that are backed by mortgages.
3) CDS - Credit default Swaps, which are effectively guarantees of risks of default on debt. A seller of CDS pays out like an insurance policy in the event of the debt defaults.
4) Mark to Market - The value of securities held are priced at what the market price is, not at cost. However, if price are at firesale levels, banks may go bankcrupt.
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