I'm planning to introduce a new type of financial instrument. Basically, it'll be a contract between two parties, whereby a buyer pays periodic payments to the seller in exchange for the right to a payoff if there is a default relating to some asset (e.g. a mortgage).

In the event of default, the buyer delivers the defaulted asset (e.g. the failing mortgage) to the seller for a payment of the original value of the mortgage. I think I'll call this a "physical settlement".

Alternatively, the seller can pay the buyer the difference between the original value of the mortgage and the market price of mortgage. I think I'll call this a "cash settlement".

I think this will provide a way to distribute risk through the financial system. The benefits are numerous. For example, a lender of mortgages can turn around and sell their mortgages on the open market. This should lead to laxer lending practices.