Fighting the Fear- in the global derivatives market
Can anything be done to prevent the next crisis?
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"Why aren't the regulators acting now, to prevent the next predictable crisis from fanning out into something far worse? I have no idea. But rather than sitting back, and letting it happen again, I think the time has come for some serious truth-telling. If the global banks, rating agencies, and regulators will not tackle the job themselves, perhaps knowledgeable people with access to the media and the web, can get the facts out, and encourage a sensible course of action. My hope is that, if an understanding of the risks and possible solutions is spread widely enough, then perhaps the authorities will act in time, before it is too late, and the markets start reacting on fear and emotion.



From what I have read, George Soros has taken the job of lead truth-teller upon himself. Using my own deep knowledge of one sector of the derivatives market, I want to help him.

A global financial meltdown is preventable, but only if we start acting soon. Prevention of such a crisis, should be the work of the Fed, other central banks, and the big global banks themselves. But they are not taking the right actions. They may be afraid of undermining already-weak bank share prices, because people would fear that more bad news is coming. They are right to be worried, more bad news is coming..."

/see article: http://www.financialsense.com/fsu/editorials/2008/0605.html

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The sidebar (on Oil Swaps) didnt make it into the version FS published

== == == == Sidebar on Calculating OTC Derivatives Risk == == == ==
Whenever they see charts of bank derivatives exposures, people get worried:

..

Note: Both Interest Rate swaps and Credit derivatives normally represent OTC derivatives.)

As George Soros said:
"Bets on credit defaults now make up a $45 trillion market that is entirely unregulated. It amounts to more than five times the total of the US government bond market."

Fortunately, the problem is not as big as it looks. Comparing OTC Credit derivatives with open interest in the Bond futres market, is like comparing apples and oranges - the two markets calculate exposures differently. And the difference is importance, but little understood.


/see: http://www.greenenergyinvestors.com/index.php?showtopic=3101

Meantime:

Some of Lehman Brothers' counterparties are limiting trading with the brokerage firm because of persistent concerns about its capital and leverage and a recent credit rating downgrade, Brad Hintz, an analyst at Bernstein Research, said on Thursday. "Fixed income counterparties have become more discerning about which Lehman subsidiaries they will trade with," the analyst wrote in a note...

oh posted that in the main forum, anyway i dont think anything can be done to save the derivatives markets apart from inflating currencies.
The derivatives market is just pass the parcel, thats all it is.