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Non-Tech : Derivatives: Darth Vader's Revenge
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To: Worswick who wrote (72)9/11/1998 9:57:00 AM
From: Henry Volquardsen  Read Replies (1) of 2794
 
Clark,

First off, on a previous topic, I suspect the credit situation has deteriorated more than when we first started. The added problem is South America, particularly Brazil. This is going to put a hit on some people who already took a hit because of Russia. I still maintain the system will be able to weather the storm but the storm warnings are going up.

As to this post, all due respect to your friend, there is a problem in the professional markets that to many traders do not feel 'connected' to the capital that supports their trading. I know a lot of traders who consider their jobs as an option on their trading skills. If they make a lot of money, they get a big bonus. If they lose, they just move to another firm and start fresh. Frankly the industry is going to contract and these people are going to find themselves in a nasty game of musical chairs. I am a big believer, btw, of requiring traders to keep a portion of their bonuses invrsted in the risk capital they are managing. It does wonders for encouraging responsible behavior.

Also that comment about non-correlative is a dangerous comment. A lot of people in the derivative industry trade a lot on the basis of correlations. This works fine when the markets are operating normally. The problem is that when the shit hits the fan things that were once correlated cease correlating and thinks that never did, do.

Oh well need to get back to the Clinton watch.

Henry
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