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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Paul Berliner who wrote (993)	11/1/1999 3:09:00 PM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 2794

Hi Paul, I'm sorry I missed the program with Martin Mayer, I've enjoyed his books. I disagree, however, with his comments regarding non-exchange traded derivatives. First a technical point, constructing an appropriate hedge is a mathematical exercise and should in no way be a subjective judgement regarding open interest. So that part of his comment is clearly wrong. I also disagree with the rest of the comment. From a practical perspective almost no one makes decisions regarding exchange traded derivatives on the basis of open interest. So if that is not a major decision point for exchange traded products why would its absence be a problem for non-exchange traded product? As far as knowing how many people are on the wrong side of the trade, thats easy and its the same for exchange traded and non exchange traded. Half. And in a free floating market the price action will tell you which side is caught. And if the concern regarding open interest is an issue of the regulators having sufficient info, the market makers all report that info so the Fed et al has pretty good info and probably more than provided by the exchanges. I don't know where he gets the idea that institutions are releveraging themselves to pre Russian crisis levels. The folks I speak to have seen any recent big pick up in activity. Its pretty depressing in fact. And I know of some recent further deleveraging. I'm not certain all the widening of spreads has been Y2K related. There are other factors as well. That said there has been some so you will get some narrowing. But as rich as it looks its still thin soup compared to the good old days of the 80s and even early 90s -g-. As far as my retirement all I can say is that I am very happy not getting 2 am phone calls from Asia -g- Henry