Few firms would accept Enron's name as guarantor of a credit derivative.
UBS, filed a lawsuit against a rival, Deutsche Bank, for refusing to pay out on a credit derivative on Armstrong World Industries, a maker of building materials based in Pennsylvania.
As Citigroup faces another massive quarterly write-down of credit derivative assets, questions remain about other banks' exposures, and when the crisis goes from a trading book issue into an industrywide credit quality problem.
For US banks in particular, there's an important question whether this encouraged rollover of loans would oblige them to pay out under the credit derivative contracts they may have written to insure the debt.
Goldman Sachs and other credit-derivative dealers would prefer not to accept these bonds although they are reluctantly doing so.
Apart from anything else, Bloomberg and the Wall Street Journal both highlighted the big credit-derivative positions being taken by JPMorgan in London a few weeks ago, and the bank rejected the suggestion that there were serious dangers here.
The problem with America's economy is that the last bubble, the "home-mortgage, derivative, credit default swap bubble" popped, as all economic bubbles eventually do.
The venture between the two Chicago firms is meant to launch within 30 days and would provide a fully integrated trading and clearing platform for credit default swaps, the complex derivative contracts that have been one of the flash points of the credit crisis.
Clearly, the brutal financial damage that swept the financial community due to unregulated, little-understood derivative contracts like credit default swaps is one of the most controversial issues of the financial meltdown.
In the domain of derivative contracts like credit default swaps or auction-rate preferreds (which even George Soros didn't know existed) or complex collateralized debt obligations of mortgage-backed bonds, there was a "failure to know what isn't known, " and the ramifications for not knowing were huge.
Abrams, who started out with Goldman Sachs researching derivative trading strategies and later worked at Credit Suisse and then Merrill Lynch as co-head of US equity derivative trading, founded Titan Capital Group in 2001.
FORBES: Russell Abrams' Hedge Fund Accused of Fraud Amid Losses of 70%
We always connect the good, right, with the derivative, the good with the credit.
Schlosstein picked out the growth of credit-default swaps, a type of derivative often used purely for speculative purposes.
If criminal charges were filed--even without ever being tried--AIG's stock price would plummet, institutional holders would be forced to sell because of their own bylaws, and the company could lose the sterling credit quality it needed to write insurance and derivative contracts on favorable terms.
Credit default swaps (CDSs) are one type of derivative contract, and regulators in the US and EU put them on a faster track to exchange clearing.
Meanwhile, Olam has budgeted for margin calls on its derivative hedges and is helping clients with letters-of-credit problems by selling smaller lots on a cash basis.
The venture between the two Chicago firms is meant to launch within 30 days and would provide a fully integrated trading and clearing platform for the complex derivative contracts that have been one of the flash points of the credit crisis.
Citi faces a fourth quarter filled with uncertainty about the value of its remaining mortgage-derivative holdings, related short-term debt conduits and the possibility of further deterioration in consumer credit quality.
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