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THOUGHT FOR THE DAY!

" One in 10 chance perhaps, but save Chile! ... not concerned with risks involved ... $10,000,000 available, more if necessary ... make the economy scream."-- CIA Director Richard Helms, discussing plan to destabilize government of Chile under democractically-elected President Salvador Allende

 

Lehman: The Counterparty Risk

As we write this, CNBC is reporting that Lehman Brothers, Inc. (LEH) has a notional amount of outstanding OTC positions of nearly $800 billion. Since Lehman is going into bankruptcy, what does that mean for the rest of the financial markets?

Each of these trades has a counter party, an institution that is expecting to pay off or get paid according to the terms of the agreement.

Webmaster's Commentary: 

The music has stopped, and there is a shortage of chairs.

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Posted on Sep 14, 2008 at 22:10
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Third parties will now be known.

roadrunner1234

The problem with the derivatives and swaps is that a lot of the time the buyers do not know who the sellers are and vice versa. This creates a problem when the market falls apart. There can also be third parties who have bought in or bet on the transaction that are unknown. This is going to be real interesting.

09/15/2008 - 02:16

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