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

To: Worswick who wrote (49)	9/7/1998 10:12:00 PM
From: Henry Volquardsen	Respond to of 2794

pretty accurate the description of how the swap works is accurate and the ability to get greater leverage is also accurate. It is also true that there is no clearing house for swaps as there are with futures but that is not a bad thing. All the futures exchange is give you one credit risk, the exchange. Yes the swap dealers wind up taking credit risk but often the credit is better than the exchange. Also most of the swap dealers are financial institutions so they are in the business of taking credit risk. So the real question is if the banks are doing their homework and not entering deals with counterparts who are taking excessive leverage. But in essence this is no different than the question of if they are doing the proper credit homework on loans. Henry