I was watching this thing on the YouTubes about carrier pigeons, they didn’t have to kill every single one of them to cause their extinction but just enough for them to be incapable of breeding.
if this is an individual than fine, but if it's a derivative wrapping up a bunch of opaque "assets", purchased by a fund that manages say retirement savings for mandatory investors like a pension, there is a huge risk. It's like if every teacher was required to finance a sub-prime mortgage.
They have risk management people though. If those people aren’t doing their jobs, the fund has bigger problems. There are much larger and less hypothetical issues with public pensions around risk.
It seems to be self-regulating, people put money in and can’t get it back out so stop putting money in.
Until the next hype cycle when a new group learns the lesson of “there’s no such thing as a free lunch.”