[H8crilA]

OMG, you made me read his article, and only then realized how ludicrous the "cheapest-to-deliver option" is. I had no idea you can send the CDS issuer any bond! Of course this is just an option for the scenario of "the congress got into a massive fist-fight and couldn't press the `yes` button on their voting machines for three weeks straight". What a hilarious piece of financial engineering.

[khuey]

A reminder that "technical debt" doesn't just apply to software, I guess.

[quickthrowman]

> OMG, you made me read his article, and only then realized how ludicrous the "cheapest-to-deliver option" is.

It’s not really ludicrous, the US Treasury isn’t selling bonds of every duration every single day. You need some kind of framework to outline which Treasuries are acceptable to settle derivative contracts like futures/options/CDSes since Treasuries are not directly fungible like equity shares or commodities.

[Ekaros]

And also what part of finance is essentially gambling. "Hey I want to make this bet." "Sure we will sell it for this and it will pay out this..."

[jt2190]

This is only true for those who are not impacted, in this case, by a government shutdown.

For example, suppose you’re running a company that has won a government contract and you receive scheduled payments from them. You use the payments to pay your suppliers and employees. If you don’t pay your suppliers and employees on time it causes all kinds of problems.

If the government looks like they might delay their next payment to you, you can “buy insurance” so that you can still make the payments. Is this gambling? Maybe? But if you don’t gamble there are real consequences, so “not playing” is still “gambling”.