A more recent auction - recovery rate was ~40%

http://www.reuters.com/article/bondsNews/i...928853020080219

http://www.creditfixings.com/information/a...s/cds-2008.html

Markit do good daily updates for those that don't already read them

http://www.markit.com/information/news/commentary/cds.html
http://www.markit.com/information/news/com...redit_wrap.html

Your blog on Derivatives is pretty extensive...do you work in this arena???

Good article in independent

Independent

Citigroup to Bail Out Internal Hedge Fund
By AP | 23 Feb 2008 | 01:23 PM ET Font size: Citigroup earlier this week agreed to provide $500 million in credit to one of its troubled hedge funds, the bank disclosed in a regulatory filing late Friday.
Mark Lennihan / AP
--------------------------------------------------------------------------------


The Citi-managed fund, known as Falcon, was brought onto the bank's books, which will increase the bank's assets and liabilities by about $10 billion. The fund focuses on fixed income.

Citigroup Citigroup IncC
25.12 0.07 +0.28% NYSE


Quote | Chart | News | Profile | Add to Watchlist
[C 25.12 0.07 (+0.28%) ] recorded a $10 billion loss in the fourth quarter, and has been working to sell shares of itself and other assets to raise cash.

The bank might continue having trouble returning to financial health, though. After home mortgages drained more than $150 billion from the world's banking industry last year, many experts say commercial real estate loans and bond insurers could be the next culprits. In Citi's regulatory filing Friday, it detailed its exposure to these risky assets.

Bond Insurer Exposure

The bank had $4 billion in investments, as of Dec. 31, that were directly exposed to bond insurers, which have been struggling to maintain their superior ratings and scrambling for cash.


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Citi is most exposed to the bond insurer Ambac Financial, which is in talks with regulators and a group of banks, including Citi, to come up with a way to raise its cash levels. Citi's exposure to Ambac, through trading assets and debt instruments, was nearly $3 billion as Dec. 31.

Meanwhile, Citi said it had approximately $20 billion in trading-related exposure to commercial real estate, and more than $20 billion in loans related to commercial real estate.

Oh well, I suppose AIG's $11bn loss (and more to come) on credit default swaps ought to be posted here. But I think we're a little inured to the numbers now.

http://bloomberg.com/apps/news?pid=2060108...&refer=home

Ouch, that's not pocket change. It buys a lot of houses in Detroit.

I heard some woman on Bloomberg tonight say that the SWF were propping up the banks but the worry is that
the SWF will decide to stop putting money if they decide they are just throwing their money away.
Also was concerned that the countries behind the SWF will make political demands.

I reckon they should prop it up but insist that all its products are to be 100% sharia compliant.

http://ftalphaville.ft.com/blog/2008/03/05...eases-concerns/

"Credit derivatives markets continued to rally on Wednesday after reports of progress on a rescue plan for Ambac, the bond insurer, cheered investors.

Overnight CNBC said that Ambac was moving towards a deal on recapitalisation but had not yet reached an agreement.

Despite the news, concerns remain about the health of the bond insurers, especially after Ben Bernanke, chairman of the Federal Reserve, yesterday called on banks to forgive chunks of mortgage loans.

BNP Paribas said: “With Fitch raising their loss estimate on subprime to the 21% to 26% range, and Bernanke clearly indicating that there is no near term bottom to housing, it is quite amazing how S&P and Moody’s continue to rate MBIA and Ambac as AAA entities.”

Rapidly spiralling, exponentially growing losses.

This is the mark of the derivative beast.

Welcome to monetary hell.

http://www.bloomberg.com/apps/news?pid=206...&refer=bond
Credit Default Swaps Overwhelm Bernanke Ease as Corporate Debt Costs Surge

Credit trading models used by Wall Street have gone haywire, raising company borrowing costs even as Federal Reserve Chairman Ben S. Bernanke cuts interest rates.

...

The higher costs are an unintended consequence of securities that allow investors to speculate on corporate creditworthiness. So-called correlation models used to value them have become unreliable in the fallout from the U.S. subprime mortgage crisis. Last month some showed the odds of a default by an investment- grade company spreading to others exceeded 100 percent -- a mathematical impossibility, according to UBS AG.

...

The mathematical breakdown is compounding the decline by creating a vicious circle. As the cost of the swaps on the CDX index increases, the models signal a greater risk of defaults, and vice versa. A bank holding $100 million of the highest-rated portion of a swap-based CDO now has to buy $60 million of swaps to maintain its hedge against losses, JPMorgan said. A year ago, it would have had to buy $10 million.

...

``The unwinding of structured credit is eating away at the fabric of the corporate bond market,'' said Suki Mann, a credit strategist at Societe Generale SA in London. ``The increase in credit-default swaps is making it far too expensive to borrow.''

You have highlighted the mathematical impossibility. Could you explain why it is an impossibility?

In reality you can never have more than 100% of anything, and negative numbers do not exist.

In reality you can never have more than 100% of anything, and negative numbers do not exist.

whats interesting about these models (and others) is they are only as good as what they have seen to date. they are built using historical data and do not appear to build in 'what if' scenarios. they may stress test the models but clearly they do not incorporate the 'what if' results otherwise you would not get illogical results in these working models.

the trouble is the world tends to throw up unforseen scenarios every now and again. you cannot price what you dont know!

my theory is you cannot make 'abnormal' profits in the long run by betting in one direction. and if you want to make money by switching direction you need to be lucky.

1 does not equal 1 in reality, never has, never can, never will.

erm ,this may be a stupid question ,but why does one not equal one in the real world?

erm ,this may be a stupid question ,but why does one not equal one in the real world?

Don't listen. he's talking pseudo-philosophical nonsense about something of which he knows nothing (is nothing constant?)

whats interesting about these models (and others) is they are only as good as what they have seen to date. they are built using historical data and do not appear to build in 'what if' scenarios. they may stress test the models but clearly they do not incorporate the 'what if' results otherwise you would not get illogical results in these working models.

the trouble is the world tends to throw up unforseen scenarios every now and again. you cannot price what you dont know!

my theory is you cannot make 'abnormal' profits in the long run by betting in one direction. and if you want to make money by switching direction you need to be lucky.

One of the worlds largest hedge funds have gone bust by the sounds of it

carlyle corporation

Injin - please start your own thread.

More on Carlyle Capital.

http://ftalphaville.ft.com/blog/2008/03/06...s-margin-calls/

I went to an interesting talk on this the other night and the professor mentioned that one bank had commented that they were getting correlations (not default as the article pointed out) greater than one. The reason for this is that the markets are using models (we have discussed this on other threads) that may not reflect how markets behave in real life (not taking into account fat tails). It may be that other banks are using more accurate models that give them different numbers meaning that the banks that don't have this see "impossible" numbers
I was expecting cgnao to give me this answer as his is an expert in the field.
Agree on the limited historical data being a contributing factor. Also, it may be that we can improve the way that correlation is modelled.

..." The company said it received margin calls from seven financing groups that totalled $37m and it was not able to meet four of those requests.

$37m doesn't sound like a lot...

Get you.

No, I am talking about reality, which I know a lot about. The appearance of object constancy exists because of variations in a set spectrum. The actions of hundreds of trillions of variables leads to what looks like order, but that order is built, not the thing that builds. Very off topic this though, so we can move this discussion over there to talk about it if you like. Otherwise, have a look at

http://answers.yahoo.com/question/index?qi...05141637AAOA34B

http://en.wikipedia.org/wiki/Uncertainty_principle

I really shouldn't feed the troll, but those have nothing to do with 1 not being 1. Those two links are proof if ever I needed it that you're either:

a) a troll
thick
c) deluded
d) all 3

For a hedge fund to go bust over I mean. Obviously I would have to visit the cashpoint twice to get hold of this kind on money...

I guess the $37M is probably the final straw and they have managed to meet the demands of other margin calls before this.

As I said, if you would like me to continue this topic, please start a thread in the off topic section.
For the record I am.

a) Genuine
A genius (according to mensa, at any rate)
c) Without illusions.

As I said, if you would like me to continue this topic, please start a thread in the off topic section.
For the record I am.

a) Genuine
A genius (according to mensa, at any rate)
c) Without illusions.

Following the recent logic applied to the Gold thread, shouldn't this thread be moved to the Financial Markets area? Credit Derivatives is a bit specialist to be amongst the house prices up, house prices down threads.

My 2 pence worth

Is that actually 2p or or have you leveraged up via various toxic bits of paper to £200M?

As I said, if you would like me to continue this topic, please start a thread in the off topic section.
For the record I am.

a) Genuine
A genius (according to mensa, at any rate)
c) Without illusions.

Indeed. This man knew a thing or two about leverage - they used simple box-cutters to implement the attacks on the WTC which in turn set in motion the eventual destruction of the highly leveraged financial system of the west. From a 50 cent box-cutter to the $trillion global markets. Clever.

Then again, remember the 44th rule of acquistion (see sig.)