Like gamblers to Las Vegas, investors are pouring into the derivatives markets in the hopes of winning the jackpot - that is, placing the right bet on the ability of U.S. consumers to make their monthly mortgage payments in a slowing housing market.

But the bet is not simply a matter of whether borrowers, mainly those with poor credit, do indeed default on their loans. Rather, it is a calculation of how many defaulted loans it will take to bring the first dollar losses to securitizations backed by them, how long that will take and how the secondary market will react, among other factors. The gamble, of course, is trying to balance the cost of making this short bet on the market with the expected payout, market participants said last week at a lunchtime conference sponsored by UBS in New York last week.

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