"The Gaussian copula model," Julian said immediately, leaning forward. "David X. Li's correlation formula. Every major investment bank on the planet prices mortgage credit using that distribution. The fundamental axiom of that model is geographical diversification. Subprime originations in Miami or Las Vegas might see localized default spikes if regional speculative construction slows down. But Texas is running on an oil boom and the Midwest is anchored by manufacturing. The Pacific Northwest is backed by aerospace and tech. Local housing markets in the United States do not correlate to just one of them."
Julian slapped his palm against the paper. "American home prices have never experienced a simultaneous, nationwide decline in recorded history. For your trade to pay off, every single housing market in all fifty states would have to collapse off a cliff at the exact same second."
