The DTC, grand pooh-bah of major clearing, makes a first pass at trying to clear up misconceptions about Credit Default Swaps.
The most important:
- At settlement, the payments are netted. That step greatly reduces counterparty risk(s). The amount that they expect (or estimate) to change hands over the Lehman default is ... circa $6 billion. That's a very small figure compared to the daily dollar amounts traded in Foreign Exchange.
Things they need to do.
- -They should take the step of publishing the net exposures, by institutions. That will chip away at that $34 trillion figure and provide much need transparency.
- -"less than 1%" should actually be quantified. Is it near $348 billion or is it $440 billion? How does that net out?
Things we need to do.
- -"Vast majority" has to turn into all and every, just as soon as possible.
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