On the details, Buffett has actually sold gross notional on the index put options (over four indices) of $32bn. Furthermore, he has undertaken CDS swaps with maximum loss of $8bn. These are not generally collateralized. To your example, it is technically possible for BRK to bankrupt because of large catastrophe losses (where retentions go into the multi-billions) mixing in with adverse movements in derivatives as above. The likelihood of that, however, is pretty darn remote. Still, it isn't zero.
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nothing is zero risk, but buffet could pay out those in cash today even at the full 100% loss, Berkshire has nearly 40 Billion reserves, not to mention that the bulk of the large ones aren't maturing till between 2017 and 2021. And for there to be a 100% loss every company in the index would have to go to zero.
Notional derivatives value = $99,600,000 Whooooo looks like a big scary number hey? But we are talking $10,000 move per basis point per side and where one side gain is robbed by the other sides loss. There is nothing here. If the value of these two sided trades moves more than 0.1% per day we are talking exciting times.
Yes the way you have used them is absolutely wrong because you don't understand what you are quoting. That is my point yet again. You read the headline number and make the worst assumption based on nothing more than fear and hope of disaster. Sure in one way they are correct figures but you cannot actually read much in to them.
Credit risk in derivatives differs from credit risk in loans due to the more uncertain nature of the potential credit exposure. With a funded loan, the amount at risk is the amount advanced to the borrower. The credit risk is unilateral; the bank faces the credit exposure of the borrower.
However, in most derivatives transactions, such as swaps (which make up the bulk of bank derivative contracts), the credit exposure is bilateral. Each party to the contract may (and, if the contract has a long enough tenor, probably will) have a current credit exposure to the other party at various points in time over the contract’s life.
Moreover, because the credit exposure is a function of movements in market factors, banks do not know, and can only estimate, how much the value of the derivative contract might be at various points of time in the future.
Measuring credit exposure in derivative contracts involves identifying those contracts where a bank would lose value if the counterparty to a contract defaulted today.
After the Japanese QE round 98 announced last week gold acted opposite to what you would expect. That to me is a warning that it's playing a 'different game'.
Looks crashy.....
Phys demand not looking good either.
http://in.reuters.com/article/2014/11/03/gold-demand-asia-idINKBN0IN0TW20141103
Also I have the same problem.
Roughly half the stocks I buy are manipulated downwards so I lose money.
And Roughly half the stocks I short are manipulated upwards.
Outrageous!
Ive only been in the game a few years but having spoken to fund managers etc, they certainly agree its a period they've not experienced before. Seems the rules have changed.
What does that even mean?
Speaking of :fan This has the potential to get nasty here. After the Japanese QE round 98 announced last week gold acted opposite to what you would expect. That to me is a warning that it's playing a 'different game'.
Looks crashy.....
Looks crashy.....
dengo;827142_________26th-May-2014 10:11 PM said:
I thought you of all people could work that one out? As per A, FOA & FOFOA it's all about the currency war underway. With the EU looking like it's back to recession like growth (if they are lucky?) and Japan attempting financial Hara-Kiri, what else have you left - the cleanest dirty shirt USD. USD get's pumped, everything else get's dumped, casualties along the yellow brick road...................
I guess after 13 years of being wrong a few would give up and look for something a bit more productive.
So at some point there has to be a reaction.
Or everyone who matters has finally given up on the idea that mega inflation is coming. I mean the bugs have been saying it's 6 months away since 2001.
I guess after 13 years of being wrong a few would give up and look for something a bit more productive.
As for ZH I haven't noticed any massive volume but will check the open interest change tomorrow.
Of course, but 'markets can remain irrational longer than you can remain solvent'
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