Market Completenss (fg)

Passage of S. Cecchetti's speech:

Once upon a time, payment streams and risks came bundled together. Bonds were sequences of coupons with principal payment at maturity, and the issuer could default on some fraction of those promises. Today, bonds are stripped so that coupons and principal can be purchased separately and the risk of default insured. And the risk of default can be sold off separately. More generally, financial engineers have made it possible to purchase or sell virtually any payment stream with any risk characteristics.
This ability to separate finance into its most fundamental pieces – the financial analogue to the particle physicist’s protons, neutrons and electrons – has made it so that risk really does go to those who are most willing and able to bear it.