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Is the Leverage a Fake Model?
Banks are using accounting equations to value assets that are just showing up as a dollar figure on their balance sheet without displaying the calculation. What goes on my balance sheet is the market value of that swap, because there's future cash fulls involved. You can create a synthetic repot transaction where almost none of it shows up on somebody's balance sheet Because of the way the accounting rules are. It sounds like this was just that lesson learned the hard way.