Derivatives: Darth Vader's Revenge
An SI Board Since August 1998
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Emcee:  Worswick Type:  Unmoderated
According to informed sources as of March of this year the Long TErm Credit Bank of Japan had approximately 50 trillion yen of derivative contracts $725 billion dollars as of the exhcange yen/dollar currency rates of August, 1998.

Now that LTCB is finally acknowledged to be broke what has happened to this exposure? Has $725 billion dollars gone to money heaven?

One worries.

What does this portend for our own banks where all derivative contracts appear to be cross linked?

Is the global financial system about to be swamped with between $100 trillion and $500 trillion in unresolvable derivative contracts?

Where does one hide in this scenario?

According to the Federal Reserve Bank of New York...."activities in the 1996 annual reports of a sample of the largest, internationally active banks and securities firms in the G-10 countries, and notes improvements since 1993. The analysis builds, in part, upon a framework used by the Federal Reserve in analyzing the trading and derivatives disclosures of major U.S. banking organizations.

In total, 79 major banks and securities firms in the G-10 countries comprised the sample reviewed for the 1993-1996 period, representing over $14 trillion in total assets and over $83 trillion in notional amounts of derivative instruments. Disclosures in the 1995 and 1996 annual reports of a major securities firm in Hong Kong were also reviewed.

The analysis revealed that there have been general improvements as well as voluntary innovations in the annual report disclosures of a number of the surveyed firms. In particular, there were notable improvements in quantitative disclosures about market risk in 1996 and 1995. However, despite encouraging advances in disclosure practices by a number of institutions in the G-10 countries, many institutions continued to disclose very little about their trading and derivatives activities".

Please See:

...for the full text of the 37 page report and the abstract.

Personally, I am worried about this.

I am surprised that a discussion of one of the most pressing questions of our time.... has not been addressed sooner.

Thanks for your consideration and, I hope, interest.

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ReplyMessage PreviewFromRecsPosted
2560The only way the criminal activity will stop is if top executives and board membSam2Thursday
2559This is small change compared to what the banks made...ggersh2Wednesday
2558 Message 30075666 In FX rigging: "If you ain't cheating, you ain'tThe Ox1Wednesday
2557There seems very little to say on the subject of Derivatives that is new or diffWorswick4May 15
2556Your most likely the old days they hired these guys, today you need ggersh1April 26
2555This is less than meaningless in any matter of what's taken place, it's teevee-April 26
2554This is less than meaningless in any matter of what's taken place, it's ggersh-April 26
2553it is no different than an upstart drug dealer trying to muscle in on another dteevee1April 25
2552Micheal Lewis has a take on the flash crash guy bloombergview.comggersh2April 25
2551"I’m Not Crazy, I’m Scared" - Why For One Trader, This Time It Is Diffggersh-April 24
2550Sam one other point, every clearing firm would limit the size of orders placed ggersh-April 22
2549Sam, I know first hand what he meant by spoofing, and canceling orders. It has bggersh1April 22
2548I think you misinterpreted that. He knew how to cancel orders. What he wanted waSam-April 22
2547The guy wanted to find out how to cancel orders by calling his FCM..... spoofingggersh1April 22
2546What do you mean by that?Sam-April 22
2545That's the sickest reporting I've ever read.....ggersh-April 22
2544This is a column on spoofing by Matt Levine from last January, when another spooSam-April 22
2543More details on what Sarao was doing as well as a lot of thoughts and speculatioSam-April 22
2542The Bloomberg story on the alleged flash crash trader. Mystery Trader Armed WiSam-April 22
2541This is mind boggling if true. The implications are staggering and wide ranging.Sam1April 22
2540I don't really know much about them, but I am pretty sure that they aren'Sam-March 4
2539Although it still isn't good. And I would definitely not like to be "baHawkmoon-March 4
2538Reuters gives a somewhat less dramatic version of what is happening with Heta. ASam-March 3
2537At work in the night kitchens of finance .... I'd say "they" areWorswick1March 3
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