From the Institutional Risk Analyst, and interesting note on systemic risk: “The net increase in financial exposures due to the existence of the CDS market in sovereign credit risk has not made the real economy safer, but instead multiplies the dollar amount of the basis risk in all markets, real or imagined. You cannot get rid of systemic risk and “too big to fail” until you limit credit derivative products to holders of actual debt. Instead we have hedge funds and banks gambling on the end of the world.” For the rest of this analysis, click here.
