Please help support WRH by visiting our advertisers!

THOUGHT FOR THE DAY!

"I am strongly in favor of using poisoned gas against uncivilized tribes. The moral effect should be good...and it would spread a lively terror.... "-- Winston Churchill commenting on the British use of poison gas against the Iraqis after World War I

 

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.

Log in
to vote
0
Posted on Sep 14, 2008 at 22:10
Tags:
»

Comments

1

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

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.