tragicomix

Lehman CDS Datapoint of the Day

This is amazing.

Bo Peng says that: "On Oct 21, somebody [group A] will have to pay somebody else [group B] billions in cash to settle Credit Default Swaps (CDS) on Lehman. Estimates on what this entails range from $100 billion to as much as $400 billion.".

Felix Salmon has $6 billion net pay out.

Michael Edwards is very satisfied that it all worked out right but does not say what the net pay out is according to him.

The head of the German Financial Regulators said in a Reuters story today that "We're still licking the wounds of Lehman," said Jochen Sanio, president of the German Federal Financial Supervisory Authority, at an international banking conference. "It caused international damage of $300 billion outside the U.S."

Is the panic injection of equity by OECD member countries is based on the hard reality of a $300-400 bn cash payout (according to Bo Peng) or may be a misunderstanding (possible inference from Felix Salmon) ?

One thing is clear. Don't let rocket scientists anywhere close to where their bets co-mingle with normal fund flow ! Merriwether, Salomon, LTCM and now everybody has made the grievous error !



I have never seen estimates that are that much in variance --- from $6 billion to $400 billion.

So what is the correct take on this.