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 Non-Tech : Derivatives: Darth Vader's Revenge

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To: Henry Volquardsen who wrote (1054)2/19/2002 5:15:26 PM
From: LLCF of 2330
 
The big risk with derivatives is indeed credit risk and the 'netting' of the contracts. The trillions in notional amount [much smaller than it sounds, the notional value of one S&P is 1100] in many cases are long X barrels of oil from XON and sort X barrels to ENE for instance. So the actual amount on the books appears meaninless, unless of course a daisy chain got started due to a couple bad apples. Greenspan tried to get congress to pass a 'netting' rule that would keep netted derivatives out of bankrupcy court [net the contracts before fighting over the carcass]... don't know what ever happend to that.

dAK
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