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.

~

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?

Do CDS spreads lead corporate bankruptcies?

The performance of [CDS] spreads as default predictors varies across sectors – but there are caveats.

Template for Contingent CDS being written

According to reports, it appears the derivative market is preparing for an increase in contingent credit default swap (CCDS) trades this year.

China’s Financial Asset Exchanges to add liquidity

China is continuing along its path toward financial modernisation with the creation of new financial asset exchanges across the country.

Bootstrapping Credit Default Swap Data

Here is a sample site from Wolfram Mathematica demonstrating their method of bootstrapping CDS index data.

Credit default swaps on companies without debt

The examples of a major retailer and a major music giant highlight the growing use of CDS on companies without the ‘credit’ in ‘credit default swaps’.

Analysis: What happened to Pershing Square’s BP swaps

A look into William Ackman’s BP credit default swap trade that went unmentioned in Pershing Square’s recent third quarter report that could be producing losses for the hedge fund

China officially begins trading credit risk mitigation tools

It is official. After years and months of preparation and speculation, China has officially introduced their own version of credit default swaps to the domestic market.

What kind of swaps does Pimco like?

Think credit default swaps are just the domain of an exclusive set of New York and London hedge funds? Think again. CDS have even entered the public conversation of the largest bond mutual fund company: Pimco.

Municipal Market CDS – ♪ Somebody call 9-1-1…Fire burning in the muni market ♬ (Part 3)

Part 3: The Swaps (Municipal CDS)