Home > Uncategorized > US$62 trillion CDO/CDS may be an underestimate …

US$62 trillion CDO/CDS may be an underestimate …


Bloomberg.com: Exclusive

The most comprehensive report on unregulated credit-default swaps didn’t disclose bets in the section of the more than $47 trillion market that helped destroy American International Group Inc., once the world’s biggest insurer.

A study by the Depository Trust and Clearing Corp. fails to include privately negotiated credit-default swaps that insurers such as AIG, MBIA Inc. and Ambac Financial Group Inc. sold to guarantee securities known as collateralized debt obligations. It includes only a “small fraction” of mortgage securities, … a total $33.6 trillion of transactions on governments, companies and asset-backed securities worldwide, based on gross numbers … the study may have missed as much as 40 percent of the trades outstanding in the market, Cicione said.

The data are “likely to underestimate the amount of net CDS exposure,” he said in an interview. “A broadening of the coverage to the entire market is what investors really need.”

The story till now …

For the last 3 months, the figure of US$62 billion was thrown around. It now appears that these estimates may be conservative. It may turn out that this gross figure may be higher. Hence, the bailout figures may also need to increase.

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