Amount Quote by Robert F. Engle
“I think what we need is better understanding of how to do risk analysis of a CDO, but that they still can perform a very valuable function because they can aggregate these risks and pass them around so that mortgages or other kinds of loans can be packaged and sold to investors all over the world, who in most times, would justify a small amount of each one.”
About This Quote
Source Speech: Financial Conference, 2005
Risk analysis of complex financial products can be valuable when it aggregates and distributes risk, enabling broader investment opportunities.
In simple terms: Aggregating risk lets many investors share small portions of many loans.
Key Takeaway
Use risk analysis to spread risk responsibly.
Themes
finance
risk management
investment
structuring
Mood
analytical
cautious
Type
explanatory
technical
When to use this quote
- banking
- investment funds
- mortgage markets
- regulatory review
Key Concepts
credit risk
securitization
systemic risk
Questions to Reflect On
- How does risk aggregation affect financial stability?
- What safeguards can prevent misuse of risk pooling?
A Different Perspective
Risk aggregation can mask underlying vulnerabilities and create systemic exposure.
