Bubbette

Lehman CDS Net Settlement Only $6B: What Does It Mean?

Bo -

if A owes B $600B and B owes C $540B,
The Net for B is $60B,
but someone still has to give C his $540 - looks like A is on the hook for that too in the net settlement process.

How are you coming up with an overall net of $60B?
That would only happen if C or someone else owed A $540.

It looks to me like the issue is whether some players have large unhedged positions, and what happens when they don't have the funds to pay - triggers another round of CDS settlement that may take more unhedged players out etc.