The CDS nightmare that was no nightmare

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This week, Robert Pickel, chief executive officer of the International Swaps and Derivatives Association, explained in an article in the FT how counterparties to CDS trades on Lehman Brothers cash-settled their transactions. The media was announcing payout figures of up to US$ 400bn, however, after paying 91 cents on the dollar and after netting, the real pay-out reached somewhat between US$ 6-8bn. Most of it has apparently been collateralized. So. luckily, the world did not go under because of the bad derivatives and the evil hedge funds. Effectively, CDS markets helped to avoid further losses during the short selling bans, since a lot of funds used CDS as proxies for shorting stock.

http://www.hedgefund-lawyer.com/