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Strategies & Market Trends : Waiting for the big Kahuna
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To: carranza2 who wrote (79739)3/15/2008 9:22:46 AM
From: Real Man   of 94695
 
You've seen CDS at work here:



Nobody could bail them out. This is default insurance,
where notional value becomes real value in the event
of a default. Most dangerous type of derivatives.

Interest rates swaps are different, and notional value
does not correspond to real value at all. However, if
long bonds (TYX, TNX) spike higher as a result of 100 bp.
interest rate cut, and corresponding dollar melt, look
out!

Looking at YEN, a significant slice of currency swaps could
be in trouble. So, credit derivatives cascaded to other
derivatives.
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