Wednesday, April 22, 2009
CDS: which do you want to hear first the good news or the bad news?
CDS market was behind a lot of the risk taking that fueled the hp bubble. When it came to the risks to the CDS market itself there was the arguement that "most contracts balanced each other out". Since the crunch it seems players have been tearing up balancing contracts. The good news is that 38% have been torn up. The bad news is that it was only 38%, which means that most presumably most don't balance each other out. So this still leaves $38 Trillion financial weapons of mass destruction targeting the world's economy, I mean the world's tax payers.