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Politics : American Presidential Politics and foreign affairs

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To: TimF who wrote (29565)	9/17/2008 5:52:27 PM
From: DuckTapeSunroof	Read Replies (1) of 71588

"The market in derivatives can itself be risky, but that doesn't mean it increases risk." You cannot compare products that are CENTRALLY CLEARED and SETTLED with ones that are not, and that have no regulatory authority standing behind them. That was my point --- WAY DIFFERENT risk metrics if you have to 'take someone's word' on valuation instead of having a transparent market price for a standardized product you can check: When the derivatives have no centralized or regulated marketplace to have trades settled on (as is the case now unfortunately with the mammoth Credit Default Swaps market...) then what you have is a "liar's market" where you have to 'take people's word' for what instruments are worth, what the value is in the underlying fundamental assets (such as 'private label' sub-prime MBS, etc.) That is an inherently MORE RISKY 'market', much more prone to wild boom/bust cycles, then a well regulated and transparent public market where trades are made, and valuations assigned tick by tick, in the open light of day, and there are established rules for handling 'counter-party risk'.

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