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.

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.

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.

A lot of ambitious code has been written into the law for those and we will have to see if it actually works, if we have another example of a big financial institution going bankrupt.

When large companies take on risk, then they impose risks on the rest of the system. And these are systemic risks and these systemic risks we never used to think were really that important, but as soon as we recognize how the financial sector - the risks the financial sector takes on can impact the entire global economy, we realize that those risks needed to be controlled for the social good.

If you have information that a company is not as good as its stock market valuation, you don't have a way to sell that stock unless you already own it. And so that information doesn't get incorporated in the company's stock price as fast if you don't allow short selling.

I mean, we've always had gold bugs, but now we sort of realize that Treasure Bills might be in the same category. And we have derivatives like credit default swaps which are in this category, and we have derivatives like volatilities that are actually an asset class that we can invest in which are now - would out perform if we have another financial crisis.