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It's a great question. I think it will make more sense if you substitute the word "market" for "business." That is to say, the financial guarantee market, all told, is manifold larger than Primus' book. Each of their risks are discrete, but as you rightly point out, even discrete risks can be catastrophic levered 35 to 1.

But what Jasper is saying is that the swaps market is liquid enough that Primus doesn't have to hold onto a credit default until it matures, which allows them to get out of any security that starts showing signs of distress.

Love your contributions on HG, and it's really great to see you here at Global Gains!!

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