Morgan Stanley goes to the bench and comes up with a sales guy to help it manage risk...
Eh, it's their capital.
Meanwhile, it's still a bit of a question mark of how MS and Merrill, not big distributors of subprime, ended up with so much subprime and CDO exposure.
Was it all puts on CDOs or bonds?
Was it credit default swaps (CDS) that physically settle? If so, that's a big, bad trial for the credit derivatives market - all derivatives markets have problems when there is illiquidity in the underlying ... It's not just continuous hedging. Sometimes it is the ability to get rid of a position that you end up with through exercise.
Was it providing liquidity to clients (i.e. being nice)? It seems unlikely, but there has been a lack of conspicuously large investors - pension funds, mutual funds - who have recognized CDO losses, right?
More to be written in the saga, no doubt.
Friday, November 30, 2007
Naked, Financially Speaking
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment