Let's make a real bet...

[Naked Gents Rut]

Why not just make that firm's directly obtaining credit protection, and proportional assignment thereof, conditions of your contract(s) with them?

You don't really want to discuss the potential of default with a company you're doing business with. A credit default swap lets you protect against their potential default without them ever knowing.

[Darius871]

Originally posted by KrazyHorse
Yes it does.

Margin, margin, margin.

Exchanges require margin so that even if the holder of one side of a contract goes belly up there is enough in the margin account to cover the other side.

Now, the exchange will have to close out its position, but it's supposed to be well-capitalized enough that the collapse of any single party on a single day will not be enough to drive the exchange into insolvency.

Ah. Guess you learn something new every day. I suppose AIG et al never could have gotten so out of hand if they had to pay the margin each time.

[KrazyHorse]

Originally posted by Darius871


Why not just make that firm's directly obtaining credit protection, and proportional assignment thereof, conditions of your contract(s) with them? Saves the hassle.

Why do they have to know that you're worried about their balance sheet? Easier to have a liquid market in CDS

[LotC]

Originally posted by Ming



You can find examples of people calling others liars, hyporcrites and other other innocuous insults in just about any politcal thread When it is a minimal thing, it is usually ignored. But when it goes ON AND ON AND ON with no end in sight, you can bet your sweet life that we will put an end to it

I'm giving 20-1 odds against rah banning anyone for that. Any takers?

[Darius871]

Originally posted by Naked Gents Rut
You don't really want to discuss the potential of default with a company you're doing business with. A credit default swap lets you protect against their potential default without them ever knowing.

Originally posted by KrazyHorse
Why do they have to know that you're worried about their balance sheet? Easier to have a liquid market in CDS

Huh, as an executive I'd just have a preference for amicable transparency from firms with whom I do (scratch that - to whom I provide) business of very substantial volume, and a way to make sure it doesn't make you look too "worried" about them would be applying it across the board to all business partners rather than selectively, but surely that's why I'll never get into business; too much silly concerns about inadvertently hurting feelings, bruising egos, or just plain stoking an atmosphere of distrust. I'll just stick to the comfortable clarity of litigating the **** out of the ****ers after things go bad

[KrazyHorse]

Also, if we enforce privity as we've been defining it then companies will not be able to purchase their own credit default protection because they don't own any of their own debt.

[KrazyHorse]

I'll just stick to the comfortable clarity of litigating the **** out of the ****ers after things go bad

You don't want to get paid in 6 months. You want to get paid now.

[Darius871]

No, by that I just meant I personally would rather eat broken glass than go into business and prefer being a shyster. The sheer clarity of "v." is like a warm blanket.

[Ben Kenobi]

I'm giving 20-1 odds against rah banning anyone for that. Any takers?

I'd take that but Rah has already banned me once.

[KrazyHorse]

Five weeks after the government launched an unprecedented bailout to save the private company from bankruptcy, AIG has so far burned through $90.3 billion of government credit.

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/24/AR2008102401715.html?hpid=topnews

(via marginal revolution)

Wow. 90 billion in 5 weeks?

Holy ****.

[KrazyHorse]

Also: it seems to me that the only real difference between the "Paulson plan" of buying "distressed assets" really is equivalent to the latest plan (first 250 billion to recapitalize banks) except that the 250 billion goes through the leverage multiplier and comes out as 3 trillion or so. And if Paulson thought he hit a wall asking for 700 billion it would have been interesting to see what would have happened if he'd asked for 3 trillion.