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 [原创] Re some posts... |
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[原创] Re some posts... -- 天凉好个哈糗 - (2430 Byte) 2008-10-15 周三, 11:53 (3045 reads) |
parisparis
头衔: 海归少将
声望: 讲师
加入时间: 2004/09/04
文章: 1996
海归分: 276207
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作者：parisparis 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
first, that Chinese article is a trash. Too many factual mistakes. Merton, Scholes are great men who helped to solve the valuation puzzle. But when looking at their 1974, 1975 works, you can not help laughing how unrealistic some assumptions are. They are genius.
Second, when you post your comments, be alert at your potential bias given that you work for a hedge fund trading and profiting from equity and derivatives. Sometimes, where we put our ass might cloud our judgment as well as conscience.
CDS is a great innovation which provides an easy and more timely credit profile for issuers. BUT it also has its own drawbacks coming back to haunt the banking system.
1. Insider trading is rampant in this market. I do not need to cite more examples, you know what I am talking about. OTC structure is more cost-efficient and regulation-light, but it allows the abuse of insider trading.
SEC is totally sleepy on that.
Of course, Aussies will say we do not care, actually we profit from that. While, in NY, everyone knows it is a felony. Many people earned millions from CDS insider trading, but that's illegal and unfair.
2.There is no central clearing house, no solid mechanism to control counterparty risk, no transparent information. Regulators have no clue who's really have which kind of exposure. Risk are not disclosed fully in annual reports.
In a true free market, we can allow CDS players to do whatever they like so long as they clean up their own sh*t in times of turmoil. But in reality, taxpayers have to step in to help since credit derivatives (CDS included) created a big mess which will bring us all back to 1929.
BTW, some hedge funds should not be allowed to do CDS trading at all since it does not have enough capital to cushion the loss, but enough leverage to transfer disaster to their banks.
3.Tool of pure speculation. The nominal value of corporate CDS contracts is 3 to 4 times of the nominal value of corporate bonds, their underlying securities. During the Ford/GM bond crisis 3 years ago, several CDS contract holders will claim the same underlying bond. Put in another way, CDS contract is overissued and it becomes a vehicle for casino gambling, not purely risk diversification.
Again, we all know that.
4.Do not put all blames on Alan Greenspan. Greenspan deals with commercial banks, not hedge funds or average Joes. It is the reckless lending practices and numerous credit derivatives from the shadow banking system that contributed to today's mess. In Germany and France, where IB/hedge funds are not so strong and prolific as in London and NY, their scale of bubble is relatively smaller than in US.
Keep in mind, ECB also practised easy credit policy for several years...
In sum, several unregulated new structured products are useful at the beginning (serve certain investment or protection needs) and then quickly degrade into pure tools of speculation. They help to expand the "shadow banking system" in US and finally crashed both the banking world and shadow world.
Sir, you earn big bonus by profiting from trading--while, if all banks fail and the core of financial system is dead, you might find no exchange, no counterparties to trade with.
That's a lose-lose situation. And when both the WS and Main Street die, 1929-era-foodless-mobs will then cry out "kill the bankers AND hedgies...".
作者：parisparis 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 [原创] Re some posts... -- 天凉好个哈糗 - (2430 Byte) 2008-10-15 周三, 11:53 (3045 reads) - Let me say something in favor of 危言 -- parisparis - (3462 Byte) 2008-10-16 周四, 05:00 (633 reads)
- 比较在谱 -- 筋斗云 - (93 Byte) 2008-10-15 周三, 14:04 (500 reads)
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