Posted by: Alexandre Borovik | March 3, 2009

Grade Inflation

We, university folks, are frequently accused of our students’ grade inflation. But nothing can be compared to what is happening now in the financial world. From Reuters:  General Electric Capital corp credit default swaps  (CDS) trade 8.5% percent up front and 5% annually (in lay terms, it means that it would cost $850,000 in an up front payment, plus $500,000 in annual payments to insure $10 million of GE Capital debt). And GE Capital are still rated AAA!

This is absurd. It defies reality. This is what “CDS trading percent up front” normally means:

 

After Rembrandt

Writing on the Wall. After Rembrandt, by Anonym.

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