Robert F. Engle Quotes

I think the credit default swaps can take the place of the rating agencies who really have missed the ball in this procedure and are quite conflicted by the way the ratings are paid for. So, I would like to see credit default swaps become an evermore important way of understanding credit risk in the economy.

There are a lot of ways that investment banking models work, but these risks are not internalized by the people that are taking them.

Credit-default swaps, I think, have serious problems associated with them.

The collateralized debt obligation, the CDO, is a structure which allows you to more or less continuously choose how much risk you want to take in a whole batch of securities. And the reason why they got us into so much trouble is that it's hard to figure out how much risk you really are taking.

If there were not derivatives, there would be no bank loans at all today, because people want to get fixed-rate 30-year loans, but banks don't want to keep 30-year loans on their books.

In bypassing barriers between different classes, maturities, rating categories, debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk.

I think the people who've been the most overconfident in our business in the last decade have been the people that called themselves risk managers.

We've used derivatives for many, many years. I don't think derivatives are evil, per se, I think they are dangerous.

I think one lesson we have to learn is that there's a lot more risk than we're giving credit to, a lot more what economist calls systematic risk.

I think risk is important. I don't care if it's a great financial risk or a physical risk. You only get out of something what you put into it and the fact that you are willing to risk something means that you are going to get a lot more out of it.

So what is the role that credit default swaps can play in an economy? Well my feeling is that if these things actually will now be traded on either exchanges or some kind of central clearing, they are going to be a very good measure of the credit worthiness of different companies.

A credit default swap was confusing mainly because it wasn't really a swap at all. It was an insurance policy, typically on a corporate bond, with semiannual premium payments and a fixed term.

I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools.

Sometimes I think we can tell how important it is to risk by how dangerous it is to do so.

I am not really inclined to think there is any very effective regulation of the derivative securities markets that would be useful. People who go into it essentially ought to know what risks they're taking and I don't see any useful regulation.

There is the risk you cannot afford to take, and there is the risk you cannot afford not to take.

Risk is the price you pay for opportunity.

Think very carefully about what you want in life. Reckon with the risks.

I don't think it's a matter of going back and having a review of our process. Our process is about as thorough as there can be. Is it imperfect? Yes. Is there risk? Yes, but we start with the fact that we have an American that's being held hostage and that American's life is in danger and that's where we start. And then we proceed from there.

Credit default swap gives you something to do. You can buy some credit default swaps from them to protect yourself against the bankruptcy of people who owe you money.

At Berkshire, I both initiate and monitor every derivatives contract on our books ... If Berkshire ever gets in trouble, it will be my fault. It will not be because of the misjudgments made by a risk committee or chief risk officer.

What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn't be taking it to those who are willing to and are capable of doing so.

Risk always looks different when you're beating the system than when you've been beaten.

It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.

Risk managers and investment bankers and actually, all kinds of investors took on more risk than they expected. So there was a failure of risk management. There was a failure to recognize how much risk there was in some of these securities that people bought.