[rmrfstar]

They aren't actually complex at all. People in finance like to jargon up the work they do.

Back in '08 we heard about how "complex" CDS are. There is nothing complex about a CDS.

Whenever something bad happens in the financial sector, there is always a simple story behind it. Usually a combination of fraud and leverage.

[pgwhalen]

Bingo. Finance is just about allocating risk. When it goes wrong, it's either because 1) the risk taken was misunderstood, and/or 2) too much risk was taken.

Fraud falls into category 1 (as do many other things, like correlation of loan defaults), and leverage into category 2.

The mechanisms by which risk is allocated are generally quite simple.