USC-Col 2006-Honors Finance/Econ Grad MD

Where We Go from Here: Best and Worst Cases

I believe that's what scary about the situation with Lehman's and with the majority of companies that purchase the swaps. On fae value, those default swaps provide insurance in case of the swap. It should be used as insurances purposes only and not security or treated like bonds, and I believe they have. Lehman is not in existence at this time...how they hell are they supposed to pay. This caused massive headaches for all lawyers handling this situation because the company is not around anymore. Their may be not enough money to pay off those swaps adn didn't somebody caution that is what can occur with the default swaps. With life insurance, everyone is not going to die at the same time. With default swas, the company defaults and everyone is owed the money at the same time. Their is more than risk when purchasing these swaps.