Professor Elam

Monday Oct 3, 2011

Seems the five big banks here have 96% of the off exchange derivative exposure.

This raises the question of who is the counter party and can they perform?  If the Eurozone goes kaput, does the derivative risk do likewise?  Another good question. I suspect the banks cannot tell you their real risk exposure. I even wonder if, with all this off exchange trading, the derivatives are rather like the sub prime mortgage bonds, does any one know the real owner?

Accounting students and professors are woefully under informed about derivatives, take a read and broaden your exposure to this important topic.