Re: Greenspan' and Derivatives

["Gary Santos" <evs@xxxxxxxxxxxx>]

I don't know, Stan. $50 trillion in derivatives collateralized with
Treasuries? Of course, that's notional value but I still wouldn't bet a on
full collateralization especially if the bottom fell out. Liquidation of
treasuries can have its own disastrous effect in terms of recoverable value
and interest rates. Bottom line: time will tell. . . as long as interest
rates remain low... as long as inflation is kept low... as long as world
peace is achieved shortly... and you can't deny that there are too many
variables in the equation, Stan.




----- Original Message -----
From: "Stan Jonas" <sjonas@xxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Friday, March 14, 2003 8:33 PM
Subject: Re: Greenspan' and Derivatives


Perhaps the word collateral is confusing..
For the most part the only collateral accepted are
in the US Market place.. US Treasuries..  risk that remains
is the stochastic correlation between the movement of US Treasuries
and underlying move in the derivative.

    For those not familiar with derivatives.. the OTC marketplace is rapidly
becoming indistinguishable from the futures  with variation and initial
margining the rule not the exception.

----- Original Message -----
From: "Gary Santos" <evs@xxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, March 13, 2003 1:32 AM
Subject: Re: Greenspan' and Derivatives


> Counterparty risk goes beyond collateralization. Even if the derivatives
are
> collateralized, the question of liquidity still has to be addressed, i.e.
> the collateral may not be able to answer for cash demands especially under
a
> liquidation scenario. What valuation on collateral was used?
> Collateralization only addresses static balance sheet solvency issues via
> "dacion en pago" or the surrender of collateral as payment. And, may I add
> that the only real solution to a counterparty failure and a demand for
cash
> payment is for the Bernanke to step in with cold fiat credit via some
credit
> window at the Fed.
>
>
>