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Short selling involves selling a security that you do not yet own to take advantage of its decline. [a downside speculation tool]
To carry out this operation, an operator must first borrow the title in question. But some stakeholders are exempt from this loan. Others buy the protections, the CDS, without holding the underlying debt securities. This is called naked sales, which today are accused of being purely speculative.
Seen from Germany, the device aims to reverse the downward spiral observed on certain sovereign debts such as Greek loans, Spanish and Portuguese, as well as the fall in the shares of banks exposed to the risks of these countries. In the end, the idea is to "save the euro". "The decision is not illogical, comments David Thesmar, professor of finance at HEC, naked sales are helping to disrupt the market." But, if the device can slow down the fall of certain titles, it cannot prevent it. "It is not by breaking the thermometer that you lower the fever," summarizes Mr. Thesmar.
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