On the collateral side, clearly it was a mistake to let AIG and the monolines not post collateral. Establishing a clearinghouse will make sure this won’t happen in the future. However, apart from these two cases, margin requirements on CDS do exist and are followed rigorously. Hedge funds do post collateral to dealers when they trade CDS. It’s true that some hedge funds have to post minimal amounts, however those funds open up their books to dealers. In fact, in the case of Lehman, ISDA commented that 2/3 of the CDS exposure was collateralized.
This blog is mainly a personal storage site for articles and papers that interest me. They will mainly be about financial markets, current policy issues and articles that relate to these topics. Have fun!
Wednesday, April 01, 2009
CDS collateralisation
More from the excellent Credit trader.
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