The “notional” size of credit derivatives is larger than world GDP, and while most of these positions are netted against each other and others are unlikely to produce a total loss, there’s clearly a significant mismatch. If you ensure a Camry at the value of a Rolls Royce, are you really buying insurance or are you betting that the car gets stolen before your next payment to GEICO is due? If GEICO wrote you that policy, would it be an insurance company or something closer to a speculator?
