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Non-Tech : Derivatives: Darth Vader's Revenge
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To: Henry Volquardsen who wrote (972)10/23/1999 5:38:00 PM
From: Merritt  Read Replies (1) of 2794
 
Henry, I won't expect someone to offer a penny for my thoughts,<g> but I do have question or three: aren't the computational models used to determine the risk/premium predicated on averages - averages that don't necessarily account for dramatic events and swings?

With the trillions of dollars of potential risk exposure (in reality probably only a few hundred billion<g>) in the event of a major, and protracted, move in interest rates, or market indexes, and/or forex, isn't it a possibility that these wonderful vehicles could cause a smash-up of our entire economic system, or are there collars in place to limit loss?

Didn't AG bail out LTCM just because of such fears?
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