someone asked about credit default swap spreads, one "evil" item most are hearing on the radio, tv and reading in the financial press.
first, they are not evil and they do serve important functions in the financial industry, so do not believe in everything you hear without going to the library and doing your own due diligence.
below is the credit default spreads for morgan stanley for senior 12 month paper.
as you can see, it was very stable until last week when lehman blew up.
guilt by association took hold and the hedge funds could not control themselves!
spreads are not yet back to pre-panic, but ms cds spreads are heading back in the right direction.
paul
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