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Friday, March 29, 2024

Substantial, Over Half A Trillion Net, CDS Derisking Since March Lows

Courtesy of Tyler Durden

Analyzing CDS open interest data since the March 6 lows demonstrates a troubling trend: there has been over half a trillion in net derisking across various industries, with financials leading the pack with over $130 billion. The global tightening in the CDS universes across all sectors is one direct consequence of this substantial shift to derisking.

However the question emerges:  while every buyer is matched with a seller, who is the net seller of all of this protection. After all, this is exactly what brought AIG down – being the end chain seller of gobs of protection in various CDOs. Now that the derisking has moved to the single name inventory, one wonders if the seller is one concentrated entity which has taken on over half a trillion in net exposure. Hopefully the next market crash will not disclose (however we strongly think it will) who is next in running for AIG 2.0

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