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Foreign exchange trading

The demise of fixed exchange rates initiated a rapid rise in the level of foreign exchange trading (forex). In the United States, forex leaped from $110.8 billion in 1970, 10.7 percent of U.S. Gross Domestic Product, to $5.449 trillion in 1980, 195.3 percent of U.S. GDP.

These figures are estimates, but in April 1977, the U.S. Federal Reserve Bank of New York undertook to measure the actual amount of forex in the United States, surveying forex trading at 44 large money center banks, which the Fed believed probably represented 98 percent of all forex in the United States at that time.

This April 1977 study found there was $4.8 billion in daily forex trading, or around $1.2 trillion a year. However, this study did not include all the trading in futures trading for various currencies. Currency futures were first created at the Chicago Mercantile Exchange (CME) in 1972, the year after fixed exchange rates were abandoned.

Financial turnover compared to gross domestic product

Other financial markets exhibited similarly explosive growth. Trading in U.S. equity (stock) markets grew from $136.0 billion or 13.1 percent of U.S. GDP in 1970, to $1.671 trillion or 28.8 percent of U.S. GDP in 1990. In 2000, trading in U.S. equity markets was $14.222 trillion, or 144.9 percent of GDP. Most of the growth in stock trading has been directly attributed to the introduction and spread of program trading.

According to the March 2007 Quarterly Report from the Bank for International Settlements (see page 24.):

Trading on the international derivatives exchanges slowed in the fourth quarter of 2006. Combined turnover of interest rate, currency and stock index derivatives fell by 7% to $431 trillion between October and December 2006.

Thus, derivatives trading – mostly futures contracts on interest rates, foreign currencies, Treasury bonds, etc had reached a level of $1,200 trillion, $1.2 quadrillion, a year.

By comparison, U.S. GDP in 2006 was $12.456 trillion.

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

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***

While the housing and credit bubbles built, a series of factors caused the financial system to both expand and become increasingly fragile, a process called financialization.

Policymakers did not recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking system.

Some experts believe these institutions had become as important as commercial (depository) banks in providing credit to the U.S. economy, but they were not subject to the same regulations.[17]

These institutions as well as certain regulated banks had also assumed significant debt burdens while providing the loans described above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses.[18]

These losses impacted the ability of financial institutions to lend, slowing economic activity. Concerns regarding the stability of key financial institutions drove central banks to provide funds to encourage lending and restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments.

By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak.[25][26] As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid the higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006.[27] This increased to 2.3 million in 2008, an 81% increase vs. 2007.[28] By August 2008, 9.2% of all U.S. mortgages outstanding were either delinquent or in foreclosure.[29] By September 2009, this had risen to 14.4%.[30]

http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010

(***

Financialization is a term sometimes used in discussions of financial capitalism which developed over several decades leading up to the 2007-2010 financial crisis, and in which financial leverage tended to override capital (equity) and financial markets tended to dominate over the traditional industrial economy.

Financialization is a term that describes an economic system or process that attempts to reduce all value that is exchanged (whether tangible, intangible, future or present promises, etc.) either into a financial instrument or a derivative of a financial instrument. The original intent of financialization is to be able to reduce any work-product or service to an exchangeable financial instrument, like currency, and thus make it easier for people to trade these financial instruments. Workers, through a financial instrument such as a Mortgage, could trade their promise of future work/wages for a home. Financialization of risk-sharing makes all Insurance possible, the financialization of the U.S. Government’s promises (Bonds) makes all deficit spending possible. Financialization also makes Economic_rent possible.

(etc.)

Foreign exchange trading

The demise of fixed exchange rates initiated a rapid rise in the level of foreign exchange trading (forex). In the United States, forex leaped from $110.8 billion in 1970, 10.7 percent of U.S. Gross Domestic Product, to $5.449 trillion in 1980, 195.3 percent of U.S. GDP. These figures are estimates, but in April 1977, the U.S. Federal Reserve Bank of New York undertook to measure the actual amount of forex in the United States, surveying forex trading at 44 large money center banks, which the Fed believed probably represented 98 percent of all forex in the United States at that time. This April 1977 study found there was $4.8 billion in daily forex trading, or around $1.2 trillion a year. However, this study did not include all the trading in futures trading for various currencies. Currency futures were first created at the Chicago Mercantile Exchange (CME) in 1972, the year after fixed exchange rates were abandoned.
Financial turnover compared to gross domestic product

Other financial markets exhibited similarly explosive growth. Trading in U.S. equity (stock) markets grew from $136.0 billion or 13.1 percent of U.S. GDP in 1970, to $1.671 trillion or 28.8 percent of U.S. GDP in 1990. In 2000, trading in U.S. equity markets was $14.222 trillion, or 144.9 percent of GDP. Most of the growth in stock trading has been directly attributed to the introduction and spread of program trading.

According to the March 2007 Quarterly Report from the Bank for International Settlements (see page 24.):

Trading on the international derivatives exchanges slowed in the fourth quarter of 2006. Combined turnover of interest rate, currency and stock index derivatives fell by 7% to $431 trillion between October and December 2006.

Thus, derivatives trading – mostly futures contracts on interest rates, foreign currencies, Treasury bonds, etc had reached a level of $1,200 trillion, $1.2 quadrillion, a year.

By comparison, U.S. GDP in 2006 was $12.456 trillion.

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

***

Global Hedge Fund Assets Now Total $1.89 Trillion

March 8, 2010, 4:10 am

. . . the total assets are a far cry from the record $2.7 trillion under management in 2007.

(etc.)

The Telegraph noted that, according to the survey, New York remained the most popular home address, with 118 firms managing a billion dollars or more based there.

That far outshines London, the No. 2 home to hedge funds. The British capital now counts 55 hedge funds that manage more than a billion dollars, compared with 65 at the end of 2008.

http://dealbook.blogs.nytimes.com/2010/03/08/global-h-f-assets-hit-1-82-trillion/

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Financial Instruments have hijacked all the monetary resources in the world

Financial Instruments have hijacked all the monetary resources in the world - Derivatives, exotic financial products, futures, speculation, CDOs, MBS, commercial paper, devised and deceptive credit and credit derivatives, and Wall Street sapping the strength and resources to their own pockets

(from)

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

***

In the wake of the 2007-2010 financial crisis, a number of economists and others began to argue that Financial services had become too large a sector in the U.S. economy, with no real benefit from society accruing from the activities of increased financialization. Some, such as former IMF chief economist Simon Johnson even went so far as to argue that the increased power and influence of the financial services sector had fundamentally transformed the American polity, endangering representative democracy itself.[2]

In February 2009, white-collar criminologist and former senior financial regulator William K. Black listed the ways in which the financial sector harms the real economy. Black wrote, “The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation.”[3]

(from above wikipedia entry about financialization)

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Hedge Funds –

Because the effect is to ‘hedge’ that part of the risk due to overall market movements, this became known as a hedge fund.

Industry size

Estimates of industry size vary widely due to the lack of central statistics, the lack of a single definition of hedge funds and the rapid growth of the industry. As a general indicator of scale, the industry may have managed around $2.5 trillion at its peak in the summer of 2008.[2] The credit crunch has caused assets under management (AUM) to fall sharply through a combination of trading losses and the withdrawal of assets from funds by investors.[3] Recent estimates find that hedge funds have more than $2 trillion in AUM.[4]

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

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About Market Makers –

In currency exchange

Most foreign exchange trading firms are market makers and so are many banks, although not in all currency markets. In foreign exchange (or FX) trading, where most deals are conducted over-the-counter and are, therefore, completely virtual, the market maker sells to and buys from its clients and is compensated by means of price differentials . . . etc.

In the United States, the New York Stock Exchange (NYSE) and American Stock Exchange (AMEX), among others, have Designated Market Makers, formerly known as “specialists”, who act as the official market maker for a given security. The market makers provide a required amount of liquidity to the security’s market, and take the other side of trades when there are short-term buy-and-sell-side imbalances in customer orders. This helps prevent excess volatility, and in return, the specialist is granted various informational and trade execution advantages.

Other U.S. exchanges, most prominently the NASDAQ Stock Exchange, employ several competing official market makers in a security. These market makers are required to maintain two-sided markets during exchange hours and are obligated to buy and sell at their displayed bids and offers. They typically do not receive the trading advantages a specialist does, but they do get some, such as the ability to naked short a stock, i.e., selling it without borrowing it. In most situations, only official market makers are permitted to engage in naked shorting.

There are over two thousand market makers in the USA[2] and over a hundred in Canada.[3]

London

On the London Stock Exchange (LSE) there are official market makers for many securities (but not for shares in the largest and most heavily traded companies, which instead use an automated system called TradElect). Some of the LSE’s member firms take on the obligation of always making a two-way price in each of the stocks in which they make markets. Their prices are the ones displayed on the Stock Exchange Automated Quotation system and it is they who generally deal with stockbrokers buying or selling stock on behalf of clients.

Proponents of the official market making system claim market makers add to the liquidity and depth of the market by taking a short or long position for a time, thus assuming some risk in return for the chance of a small profit. On the LSE one can always buy and sell stock: each stock always has at least two market makers and they are obliged to deal.

Unofficial market makers are free to operate on order driven markets or, indeed, on the LSE. They do not have the obligation to always be making a two-way price but they do not have the advantage that everyone must deal with them either.

How a market maker makes money

A market maker makes money by buying stock at a lower price than the price at which they sell it. Note that because a market maker can take short positions, purchase and sale may be either way round – a market maker may sell stock and then buy it back later at a lower price. Therefore a market maker can make money in both rising or falling markets, as long as they correctly predict which way a stock’s price will move.

Stock market makers also receive liquidity rebates from electronic communication networks for each share that is sold to or purchased from each posted bid or offer. Conversely, a trader who takes liquidity from a bid or offer posted on an ECN is charged a fee for removing that liquidity.

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

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There are over two thousand market makers in the USA[2] and over a hundred in Canada.[3]

Unjust enrichment means when a person unfairly gets a benefit by chance, mistake or another’s misfortune for which the one enriched has not paid or worked and morally and ethically should not keep. A person who has been unjustly enriched at the expense of another must legally return the unfairly kept money or benefits. Unjust enrichment is an equitable doctrine applied in the absence of a contract and used to prevent one person from being unjustly enriched at another’s expense.

Five elements must be established to prove unjust enrichment:

  1. An enrichment;
  2. An impoverishment;
  3. A connection between the enrichment and the impoverishment;
  4. Absence of a justification for the enrichment and impoverishment; and
  5. An absence of a remedy provided by law.

http://definitions.uslegal.com/u/unjust-enrichment/

Liability under the principle of unjust enrichment is wholly independent of liability for wrongdoing. Claims in unjust enrichment do not depend upon proof of any wrong. However, it is possible that on a single set of facts a claim based on unjust enrichment and a claim based on a wrong may both be available. A claim based on unjust enrichment always results in an obligation to make restitution. A claim based on a wrong always results in an obligation to make compensation, but may additionally result in an obligation to make restitution and on the other hand it will result in an obligation to make reimbursement which will allow the normal citizen to the courts for its wrongdoing which it never intended to do so.

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

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In finance, a derivative is a financial contract with a value linked to the expected future price movements of the asset it is linked to – such as a share or a currency. There are many kinds of derivatives, with the most notable being swaps, futures, and options. However, since a derivative can be placed on any sort of security, the scope of all derivatives possible is near endless. Thus, the real definition of a derivative is an agreement between two parties that is contingent on a future outcome.

A common misconception is to refer to derivatives as assets. This is erroneous, since a derivative is incapable of having value of its own. However, some more commonplace derivatives, such as swaps, futures, and options, which have a theoretical face value that can be calculated using formulas, such as Black-Scholes, are frequently traded on open markets before their expiration date as if they were assets.

http://en.wikipedia.org/wiki/Derivative_%28finance%29

Derivatives are used by investors to

  • provide leverage or gearing, such that a small movement in the underlying value can cause a large difference in the value of the derivative
  • speculate and to make a profit if the value of the underlying asset moves the way they expect (e.g., moves in a given direction, stays in or out of a specified range, reaches a certain level)
  • hedge or mitigate risk in the underlying, by entering into a derivative contract whose value moves in the opposite direction to their underlying position and cancels part or all of it out
  • obtain exposure to underlying where it is not possible to trade in the underlying (e.g., weather derivatives)
  • create optionability where the value of the derivative is linked to a specific condition or event (e.g., the underlying reaching a specific price level)

Speculation and arbitrage

Derivatives can be used to acquire risk, rather than to insure or hedge against risk. Thus, some individuals and institutions will enter into a derivative contract to speculate on the value of the underlying asset, betting that the party seeking insurance will be wrong about the future value of the underlying asset. Speculators will want to be able to buy an asset in the future at a low price according to a derivative contract when the future market price is high, or to sell an asset in the future at a high price according to a derivative contract when the future market price is low.

Individuals and institutions may also look for arbitrage opportunities, as when the current buying price of an asset falls below the price specified in a futures contract to sell the asset.

Speculative trading in derivatives gained a great deal of notoriety in 1995 when Nick Leeson, a trader at Barings Bank, made poor and unauthorized investments in futures contracts. Through a combination of poor judgment, lack of oversight by the bank’s management and by regulators, and unfortunate events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that bankrupted the centuries-old institution.[4]

http://en.wikipedia.org/wiki/Derivative_%28finance%29

Examples

The overall derivatives market has five major classes of underlying asset:

Other examples of underlying exchangeables are:

Possible large losses

The use of derivatives can result in large losses because of the use of leverage, or borrowing. Derivatives allow investors to earn large returns from small movements in the underlying asset’s price. However, investors could lose large amounts if the price of the underlying moves against them significantly. There have been several instances of massive losses in derivative markets, such as:

  • The need to recapitalize insurer American International Group (AIG) with $85 billion of debt provided by the US federal government.[12] An AIG subsidiary had lost more than $18 billion over the preceding three quarters on Credit Default Swaps (CDS) it had written.[13] It was reported that the recapitalization was necessary because further losses were foreseeable over the next few quarters.
  • The loss of $7.2 Billion by Société Générale in January 2008 through mis-use of futures contracts.
  • The loss of US$6.4 billion in the failed fund Amaranth Advisors, which was long natural gas in September 2006 when the price plummeted.
  • The loss of US$4.6 billion in the failed fund Long-Term Capital Management in 1998.
  • The bankruptcy of Orange County, CA in 1994, the largest municipal bankruptcy in U.S. history. On December 6, 1994, Orange County declared Chapter 9 bankruptcy, from which it emerged in June 1995. The county lost about $1.6 billion through derivatives trading. Orange County was neither bankrupt nor insolvent at the time; however, because of the strategy the county employed, it was unable to generate the cash flows needed to maintain services.

Large notional value

Derivatives typically have a large notional value. As such, there is the danger that their use could result in losses that the investor would be unable to compensate for. The possibility that this could lead to a chain reaction ensuing in an economic crisis, has been pointed out by famed investor Warren Buffett in Berkshire Hathaway‘s 2002 annual report. Buffett called them ‘financial weapons of mass destruction.’ The problem with derivatives is that they control an increasingly larger notional amount of assets and this may lead to distortions in the real capital and equities markets. Investors begin to look at the derivatives markets to make a decision to buy or sell securities and so what was originally meant to be a market to transfer risk now becomes a leading indicator. (See Berkshire Hathaway Annual Report for 2002)

Leverage of an economy’s debt

Derivatives massively leverage the debt in an economy, making it ever more difficult for the underlying real economy to service its debt obligations, thereby curtailing real economic activity, which can cause a recession or even depression. In the view of Marriner S. Eccles, U.S. Federal Reserve Chairman from November, 1934 to February, 1948, too high a level of debt was one of the primary causes of the 1920s-30s Great Depression.

(etc.)

http://en.wikipedia.org/wiki/Derivative_%28finance%29

**

Counting one dollar per second, it would take 32 million years to count to one Quadrillion. The numbers we are dealing with are absolutely astronomical and from the realms of super computing we have stepped into global economics. There is a sense of no sustainability and lack of longevity in the “Invisible One Quadrillion Dollar Equation” of the derivatives market especially with attendant Black Swan variables causing multiple implosions amongst financial institutions and counterparties.

The single conceptual pitfall at the basis of the disorderly growth of the global derivatives market is the postulate of hedging and netting, which lies at the basis of each model and of the whole regulatory environment hyper structure. Perfect hedges and perfect netting require functioning markets. When one or more markets become dysfunctional, the whole deck of cards could collapse swiftly.

Three Historical Examples

1. The so-called rogue trader Nick Leeson who made a huge derivatives bet on the direction of the Japanese Nikkei index brought on the collapse of Barings Bank in 1995.

2. The collapse of Long Term Capital Management (LTCM), a hedge fund that had a former derivatives and bond dealer from Salomon Brothers and two Nobel Prize winners in Economics as principals, collapsed because of huge leveraged bets in currencies and bonds in 1998.

3. Finally, a lot of the problems of Enron in 2000 were brought on by leveraged derivatives and using derivatives to hide problems on the balance sheet.

(but this is the best part, my note – this article was from 2008)
Let us think about the invisible USD 1.144 quadrillion equation with black swan variables — ie, 1,144 trillion dollars in terms of outstanding derivatives, global Gross Domestic Product (GDP), real estate, world stock and bond markets coupled with unknown unknowns or “Black Swans”. What would be the relative positioning of USD 1.144 quadrillion for outstanding derivatives, ie, what is their scale:

1. The entire GDP of the US is about USD 14 trillion.

2. The entire US money supply is also about USD 15 trillion.

3. The GDP of the entire world is USD 50 trillion. USD 1,144 trillion is 22 times the GDP of the whole world.

4. The real estate of the entire world is valued at about USD 75 trillion.

5. The world stock and bond markets are valued at about USD 100 trillion.

6. The big banks alone own about USD 140 trillion in derivatives.

7. Bear Stearns had USD 13+ trillion in derivatives and went bankrupt in March. Freddie Mac, Fannie Mae, Lehman Brothers and AIG have all ‘collapsed’ because of complex securities and derivatives exposures in September.

8. The population of the whole planet is about 6 billion people. So the derivatives market alone represents about USD 190,000 per person on the planet.

Whilst outstanding derivatives are notional amounts until they are crystallised, actual exposure is measured by the net credit equivalent. This is normally a lower figure unless many variables plot a locus in the wrong direction simultaneously.

This could be because of catastrophic unpredictable events, ie, “Black Swans”, such as cascades of bankruptcies and nationalisations, when the net exposure can balloon and become considerably larger or indeed because some extremely dislocating geo-political or geo-physical events take place simultaneously.

Also, the notional value becomes real value when either counterparty to the OTC derivative goes bankrupt.

By Tom Foremski – October 16, 2008

The Size of Derivatives Bubble = $190K Per Person on Planet

By Tom Foremski – October 16, 2008

More must read financial analysis from DK Matai, Chairman of the ACTA Open.

The Invisible One Quadrillion Dollar Equation — Asymmetric Leverage and Systemic Risk

According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland — the central bankers’ bank — the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion. The main categories of the USD 1.144 Quadrillion derivatives market were the following:

1. Listed credit derivatives stood at USD 548 trillion;

2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:

a. Interest Rate Derivatives at about USD 393+ trillion;

b. Credit Default Swaps at about USD 58+ trillion;

c. Foreign Exchange Derivatives at about USD 56+ trillion;

d. Commodity Derivatives at about USD 9 trillion;

e. Equity Linked Derivatives at about USD 8.5 trillion; and

f. Unallocated Derivatives at about USD 71+ trillion.

Quadrillion? That is a number only super computing engineers and astronomers used to use, not economists and bankers.

(etc.)

http://www.siliconvalleywatcher.com/mt/archives/2008/10/the_size_of_der.php

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My Note –

As I watch the Greek economy treated with the same bond / pushing credit interest rates required of them / buying of credit default swaps so that when the bonds fail, the total amount will be paid out to third parties with no risk and unchallenged reward / credit ratings agencies downgrading their credit even as the interest payments alone are exaggerated beyond all measure / and seeing that identical “play” that was made on Fannie and Freddie driving it into the ground and on other countries around the world – driving their economies into the ground, as well –

I’m thinking . . .

and, thinking . . .

and, still considering that . . .

not one thing is going to change or be changed in all of it.

It wasn’t going to be changed five years ago, when the risk of total market collapses and the destruction of economies around the world were known to be a possibility.

It wasn’t going to be changed in 2006, when the evidence of what was before us was very, very clear and certainly known by anyone involved in the financial markets, banking, investments and academic economists.

It wasn’t going to be changed – not one iota, even in 2007 – not in 2008 and sure as hell, isn’t going to be changed now any more than it was going to be fixed, changed, regulated, repaired, or made into something right anytime before this day. In fact, there is no intention of it being changed even today.

I thought that it was because the evidence of the damage was not obvious, at the mark five years ago – except to people around the world trying to prevent it before the collapsing economies happened.

Those times are passed and the changes that were known to be ways that could prevent the collapse and ensuing crisis around the world – just would not be put in place by anybody in Washington or Wall Street or anywhere else that could’ve done it. They knew to put greater liquidity requirements on banks and insurance companies and etc., etc., etc.,

They knew the leveraging that was in play. One of many companies listed as a Fortune 500 company that would also apply to this, admitted to 96% of their operating capital being acquired by loans and re-financing loans to pay off loans simply to cover day-to-day operations. Not to be the only one to say so –  but that is insane.

And there is not one thing in any of it that is going to be made any one bit different regardless … there, in all likelihood, is the same bullshit we will be living with twenty years from now as we watch all our children turn to the same gang violence as Chicago and Juarez for lack of any other economic opportunity in the US of A, throughout Europe and across most of the world.

– cricketdiane, 04-29-10

***

Credit derivative

From Wikipedia, the free encyclopedia

In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counterparties to the transaction itself.[1] This entity is known as the reference entity and may be a corporate, a sovereign or any other form of legal entity which has incurred debt.[2] Credit derivatives are bilateral contracts between a buyer and seller under which the seller sells protection against the credit risk of the reference entity.[2]

Stated in plain language, a credit derivative is a wager, and the reference entity is the thing being wagered on. Similar to placing a bet at the racetrack, where the person placing the bet does not own the horse or the track or have anything else to do with the race, the person buying the credit derivative doesn’t necessarily own the bond (the reference entity) that is the object of the wager.

He or she simply believes that there is a good chance that the bond or CDO in question will default (go to zero value).

Originally conceived as a kind of insurance policy for owners of bonds or CDO‘s, it evolved into a freestanding investment strategy.

The cost might be as low as 1% per year. If the buyer of the derivative believes the underlying bond will go bust within a year (usually an extremely unlikely event) the buyer stands to reap a 100 fold profit.

A small handful of investors anticipated the credit crunch of 2007/8 and made billions placing “bets” via this method.

The parties will select which credit events apply to a transaction and these usually consist of one or more of the following:

  • bankruptcy (the risk that the reference entity will become bankrupt)
  • failure to pay (the risk that the reference entity will default on one of its obligations such as a bond or loan)
  • obligation default (the risk that the reference entity will default on any of its obligations)
  • obligation acceleration (the risk that an obligation of the reference entity will be accelerated e.g. a bond will be declared immediately due and payable following a default)
  • repudiation/moratorium (the risk that the reference entity or a government will declare a moratorium over the reference entity’s obligations)
  • restructuring (the risk that obligations of the reference entity will be restructured)…

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

***

Maybe if everybody playing the credit derivatives on the Greece debt will finish making this money off it being in possible default, then just maybe they’ll stop dicking around and get some rescue package over to them before it all goes to hell.

Definitely my note – cricketdiane, 04-29-10

***

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