Film

The Big Short

2015 · 2015

The clearest explanation on film of what a CDO and a synthetic CDO actually were. Watch it for the mechanics rather than the swagger, and be ready to say why a correlation assumption was the thing that failed.

• Crises and market history
• Risk
• Credit

2 ideas from this film

• FrameworkCrises and market history

  A rating is a model output, and the model rests on a correlation assumption

  Ask what a rating assumes about defaults happening together before trusting what it says about the pool.

  Any question about 2008, about structured credit, or about why a highly rated instrument lost most of its value.

• TechniqueCredit

  A capital stack is a queue for losses, and the order is the whole product

  Seniority is a queue for losses; the thickness of the slices beneath you is your protection.

  Any structured credit, securitisation or capital structure question, in an interview or on the desk.