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Soros is wrong

By Anonymous

Unless I'm misreading him, George Soros is just plain wrong about this:

Going short on bonds by buying a CDS contract carries limited risk but unlimited profit potential; by contrast, selling credit default swaps offers limited profits but practically unlimited risks.

Umm, no. Protection buyers' profit is limited to the notional amount insured. Similarly, protection sellers' risk is also limited to the notional amount insured.

Full post as published by Economics of Contempt on January 30, 2009 (boomark / email).