Let's say I want to capitalize on the financial distress of a mid-sized US city. Shorting muni bonds directly is impractical for a number of reasons, but I'm still determined. Obviously, interest rate swaps and CDOs exist, but from my position as a retail investor, these instruments are not readily available to me.
So I wonder, is there some kind of crypto-based derivative or smart contract that can accomplish this? Like an interest rate swap, let's just say for illustration 6-month LIBOR+1% for the yield on Cleveland's ABC123 municipal bonds.
It occurs to me this might exist in the DeFi space because, well, you can pretty much do anything there, right? But if there is an avenue to accomplish this using traditional methods, I am very interested to hear about it.
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