R D Olivaw

Coming Soon: The $600 Trillion Derivatives Emergency Meeting

These are HeisenSwaps - you can only know their value by destroying them.
For this and one other reason there should be restrictions on the ownership of Credit Default Swaps. Once these appear on the balance sheet of a financial entity it is impossible to assess the entity's exposure to risk. Indeed, it could be said that that is their intended purpose. If the risk of loss from these swaps was limited, diffusion would not matter because the loss would be limited. It only takes one element of a swap to hold the risk of an unlimited loss and the entire system is put at risk.
Think of infinity/n. However large n is, the risk remains infinite no matter how many hands it passes through. Try to offset it and you have infinity/n -infinity/n. There is no sane answer.