Stock Attack II - A Complete Analysis Message Board

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Strategies & Market Trends : Stock Attack II - A Complete Analysis

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To: Jorj X Mckie who wrote (39668)	9/18/2002 10:36:06 AM
From: J D B	Read Replies (2) of 52237

Jorj: I'm concerned about a different issue; not about whether JPM and financials are part of the index the particular fund benchmarks. The issue that concerns me is the use of equity index swap agreements and the corresponding conterparty credit risk they create for the fund. The leveraged funds (Rydex in my case) use these swap agreements, as well as options and futures contracts to create the leverage they seek. However, if a swap counterparty (for instance JPM) defaults on its payment obligation to the fund, this would have a negative effect on the value of MY investment. See where I'm going with this?

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