| Professor Moorad Choudhry explores the interconnection between credit derivatives, including structured credit products such as collateralised debt obligations (CDOs), and the 2007 sub-prime mortgage crash and subsequent credit crunch. He discusses how the age-old adage of investing, to know one’s risk, remains as important now as it was in the time of the South Sea bubble. He suggests further that credit derivatives, far from being in some way instruments of evil, are vital to maintaining liquidity and transparency in the financial system. |
