I've probably mentioned this theory before, but: stock markets are a bad indicator for predicting nuclear war. If a nuclear exchange happens, stocks go to zero, so the optimal move for a local is to buy any dip caused by nuclear risk. Dead and broke isn't any worse than dead.
Seems like the optimal move for a non-local is buying grossly mispriced deep out of money puts, if that is one’s view on matter.
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The trick with those bets is similar to one of the risks that real estate shorts had in 08: if you're right, your counterparty may not be around to pay. (If AIG hadn't been bailed out, or had been bailed out with a haircut for CDS counterparties, things would be different today)
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This feels like an unsatisfactory argument to me, since that answer should make the position cheaper: if you think that is a material risk, short the counterparty. Big Short had a bunch of people who were approximately right but nobody who was approximately right *about AIG.*
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