The market can deal with almost anything as long as people think they'll get paid.
It could be argued that the biggest systemic risk in connection with derivatives is from irresponsible action by governments which fail to understand the complex linkages between cash, securities lending/repo and derivative markets.
High-tech banking and finance has its place, but it's not all it's cracked up to be. I hope this sounds like a warning, because it is.
The Risk That Won't Go Away.
Credit derivatives dealers talk about their market in much the same way spotty teenagers talk about sex. A lot of people profess to be accomplished experts, but when it really boils down to it, most of them are still fumbling in the dark.
To err is human. It is quite interesting that I seem to be the only person in the history of financial markets who has admitted making a mistake.
It's the first law of finance - return of your capital is more important than return on your capital.
Last updated: January 9, 2011