The Rising Fear in Bank CDS Prices

It is not just stock prices that indicate fear.

When sharing risk actually increases risk

Please pick the sentence which logically follows the statements provided:

All bankers are greedy people. All greedy people do not like to share good things and will only share bad things.

(a) Greed is bad.
(b) Greed is good.
(c) Where is Gordon Gekko when you need him.
(d) Bankers do not like to share good things and will only share bad things.
(e) Everything you see on TV is fiction so you should not believe it.

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Risk sharing, through hedging and other offsetting activities, has long been viewed as a way to reduce risk and an integral part of proper risk management – but is there a point at which too much sharing or hedging is bad?

Sovereign credit risk more risky than corporates

Sovereign credit risk is increasingly becoming more risky than corporate credit risk from CDS market investor perspectives.

69 CDS positions

Before you jump to conclusions, let us just clarify that there are 69 positions an investor can take in corporations that are deemed less risky than the American government based on current credit default swap prices according to a recent post by Zerohedge.

Hugh Hendry turns out to be ‘right’?!

Is Hugh Hendry a genius? His prophesy may have paid off financially-speaking in a matter of weeks – though maybe for the wrong analytical reasons (so far). But at the end of the day, don’t most investors just want to make money? And markets seem to reward financial ‘rights’ & logical ‘wrongs’ much more than they do financial ‘wrongs’ & logical ‘rights’.

The beginning of the end for European Financial CDS?

EU proposals to write-down the debt of European banks in the event of another financial crisis could render the billion-dollar market of of credit default swaps referencing European banks worthless if it were to go into legislation in its current proposed form.

Credit default swaps get another temporary exemption

The SEC recently extended “temporary” exemptions from the Securities Exchange Act for credit default swaps to allow for the anticipated implementation of the new Dodd-Frank Act which is meant to address gaps in current financial regulation.

When ratings get politicized (Part 2)

Amid Dagong’s rejection for NRSRO status in the USA, it has also been at odds with American rating agencies in widely publicized financial media. (Part 2)

When ratings get politicized (Part 1)

The Securities and Exchange Commission denied Chinese credit rating agency, Dagong Global Credit Rating Company, the chance to become a nationally recognized statistical rating organization (NRSRO) in America. (Part 1)

New Basel Proposal could disrupt Financial CDS

A new proposal being floated by the Basel Committee (BC) aimed at preventing and dealing with future banking crises could throw a wrench in the way credit derivative markets covering financial single-names currently function.