The banks were doing something similar prior to 2008. They were issuing loans at like 97% LTV which is essentially the same as speculating on the underlying asset. Then they built layer on layer of derivatives on top.
They didn't have the cashflow to cover the cost of all the assignments and this has to force sell other assets which is how it spread into the overall market sell off
The banks were doing something similar prior to 2008. They were issuing loans at like 97% LTV which is essentially the same as speculating on the underlying asset. Then they built layer on layer of derivatives on top.
They didn't have the cashflow to cover the cost of all the assignments and this has to force sell other assets which is how it spread into the overall market sell off