Tuesday, June 30, 2009

Credit Derivatives

Artimus turned me onto this source. Here's their recent publication on credit derivatives.

"Was the collapse of the subprime mortgage derivatives market a disaster - or merely the warning for something far worse? In today's reading we will take a look at a much larger potential danger to investors, that of credit derivatives, as introduced

"The credit derivatives market is roughly 30 times the size of the subprime mortgage market - and potentially even more at risk in the coming years. In the previous article, The Subprime Crisis Is Just Starting, we explored the roots of the subprime crisis, demonstrated how mortgage securitizations work, and then used this knowledge to show why 2008 could be a much more dangerous year for the subprime mortgage markets - and the global financial system - than 2007. In this article, we show how the same fundamental - and quite human - motivations that created the subprime market crisis also imperil the $35 trillion global credit derivatives market."

"Unfortunately, as of June 6, 2008, and after the writing of the main article, the credit derivatives danger became much more real, to the tune of $1.7 trillion of bad news coming a step closer to financial institution balance sheets, in just one day. This update has been added to the end of the article, as part of five pages of information for Turning Inflation Into Wealth readers, that was not available in the public investor education website version of the article."

The full report:

A prior post on the topic:

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