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Non-Tech : Derivatives: Darth Vader's Revenge

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From: Hawkmoon3/5/2009 11:16:30 PM
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So folks.. what's the answer on the CDS markets?

They clearly need to be heavily regulated (I would prefer they be abolished in favor of traditional financial surety methods).

But who's got the financial wherewithal to back such a huge market? Who's going to take the other side of a CDS trade and write a contract when they are potentially on the hook for huge losses as the CDS buyers short the underlying bonds/assets and institutions who issued them..

Personally, a CDS (IMO) is an insurance contract and needs to be treated as such in order to assure the counterparties have the ability to fulfill their obligations.

Other opinions?

Hawk
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