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Tuesday, March 17, 2009

Credit Derivatives: CDS Set to Collapse Global Markets!

The top academics and Wall Street 'quants' are keeping silent about the next threat to the Global Economy.  It might just be 'THE LAST STRAW'.  What would happen if the Credit Default Swap-CDS market implodes; forcing capital starved institutions to make good on their payments and 'SWAPS' contracts?  Where would the money come from?  Another bailout...
What can the informed investor do to protect their cash from another market collapse. 
 
Transparency would help credit-derivatives market
The idea of spreading risk around the financial system was a good idea that went bad as much of the risk ultimately became concentrated at American International Group, columnist Gillian Tett explains. Tett argues that the concept of using derivatives contracts to spread risk remains sensible if done correctly and with significantly increased transparency. Financial Times
 
Battle over CDS clearing part of larger competition
Regulators in Europe and the U.S. have focused on centralized clearing of credit derivatives as crucial to their efforts to overhaul the financial system. A number of groups, including IntercontinentalExchange, CME Group and LCH.Clearnet, are moving forward with plans for clearinghouses, but uncertainties remain. The struggle is part of a larger competition between exchanges, financial institutions and other providers of financial services to trade many kinds of assets. Financial Times 
 

Victor Lloyd Smith

Millennium Lyon Asset Management

Web:      www.mlgcap.com

 

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