Re: Credit Default Swap (CDS) - Lehman Final Results In

[David Farber <dave () farber net>]

Begin forwarded message:

From: Tobin Maginnis <ptm () pix cs olemiss edu>
Date: October 22, 2008 9:51:44 PM EDT
To: dave () farber net
Subject: Re: [IP] Re:    Credit Default Swap (CDS) - Lehman Final  
Results In

Dave,

It turns out that the settlement result is not clear. In her article:  
"Lehman CDS Payout On October 21: $360bn or $6bn?" Elisa Parisi-Capone  
argues that the primary "naked" CDS bag holder was AIG and that the  
total Government bailout of $120 billion for AIG was used to pay for  
the Lehman defaults. She goes on to say that "...among dealer banks  
and AIG the CDS fallout from Lehman’s default amounts to *around $200  
billion* already."

In the comment section, a poster "M" spends a lot of time disputing  
this by arguing net liabilities are offset by counter CDSs meaning  
that investors trade positive and negative CDS which sum to zero  
resulting in no-one being at risk!?! Responses to "M" say that may be  
the case, but AIG did not have a balanced CDS portfolio leaving it  
"naked."

So only time will tell what the true losses are and how they will  
impact the already rapidly deteriorating financial scene.

http://www.rgemonitor.com/economonitor-monitor/254052/lehman_cds_payout_on_october_21_360bn_or_6bn

==========================================
David Farber wrote:
> Begin forwarded message:
> *From: *Steve Rayson <steverayson () hotmail com <mailto:steverayson () hotmail com 
> >>
> *Date: *October 22, 2008 5:58:32 PM EDT
> *To: *<dave () farber net <mailto:dave () farber net>>
> *Subject: **RE: [IP] Credit Default Swap (CDS) - Lehman Final  
> Results In*
> http://dealbook.blogs.nytimes.com/2008/10/22/lehman-debt-swaps-settled-for-52-billion/
>     Sellers of insurance on *Lehman Brothers* debt made net payments  
> of
>    $5.2 billion to settle an estimated $400 billion or more in credit
>    default swaps, the *Depository Trust and Clearing* Corporation said
>    Wednesday.
> As predicted, the net payments were a fraction of the $400 billion.   
> Its interesting to me that despite the fact that the Depository  
> Trust and Clearing Corporation said this was going to happen, there  
> was still lots of fear last week that the number was going to be in  
> the 100's of billions.
> -Steve
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