So basically what your idea is that this ETF would work better in that situation?This works fine in normal markets but not in stressed markets. The risk that they cannot transform their bonds, is what is called the transformation risk. — Benkei
Who will manage this and what are their incentives in picking "high-quality bonds" or determines what "high-quality bonds" are in the first place? Especially if such as large investors as pension funds have to use the ETF? Would this be a way to dump some toxic Greek debt to the pension funds as just paint lipstick on it and call it high-quality bonds?So, one solution I was now thinking of is the following and I wonder whether it will work:
What if the CCP creates an actively managed ETF with a certain basket of high-quality bonds (that all pension funds have) and simultaneously forces its clearing members to accept ETF shares as variation margin? — Benkei
So basically what your idea is that this ETF would work better in that situation? — ssu
Who will manage this and what are their incentives in picking "high-quality bonds" or determines what "high-quality bonds" are in the first place? Especially if such as large investors as pension funds have to use the ETF? Would this be a way to dump some toxic Greek debt to the pension funds as just paint lipstick on it and call it high-quality bonds? — ssu
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