Derivatives: Darth Vader's Revenge Message Board

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Non-Tech : Derivatives: Darth Vader's Revenge

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To: Hawkmoon who wrote (1270)	3/6/2009 10:48:24 AM
From: axial	2 Recommendations Read Replies (1) of 2794

"...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." MO, too. But they're OTC: unregulated. As long as the OTC market exists, there's no way to prevent "unauthorized" transactions of all kinds. IMO, you just can't have unregulated, opaque markets. Our fathers imposed regulation on markets because you can't trust the behavior of capital when you can't see what it's doing. You can't limit potential damage (systemic risk) when you don't even know it's there. We've already seen what can happen when the financial community buys into the myth that some yahoo quant can reduce global economics to a one-line equation. OTC works fine, until it doesn't. Then all hell breaks loose. Jim

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