Comments on: The CDS Big Bang http://www.aleablog.com/the-cds-big-bang/ Alea Jacta Est Tue, 07 Sep 2010 13:59:07 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Amicus http://www.aleablog.com/the-cds-big-bang/#comment-2802 Amicus Thu, 02 Apr 2009 05:11:29 +0000 http://www.aleablog.com/?p=3010#comment-2802 occasionally we do add value ====== Is that a hypothetical or a hypothecation? heh..heh. What? Not funny? yeah, but you just know there is a limerick in there, somewhere... occasionally we do add value
======
Is that a hypothetical or a hypothecation? heh..heh.

What? Not funny? yeah, but you just know there is a limerick in there, somewhere…

]]> By: -jck http://www.aleablog.com/the-cds-big-bang/#comment-2795 -jck Tue, 31 Mar 2009 14:28:45 +0000 http://www.aleablog.com/?p=3010#comment-2795 DD: Absolutely, agree. You have to be a nut case to trade CDS without a lawyer. DD:
Absolutely, agree.
You have to be a nut case to trade CDS without a lawyer.

]]> By: DerivativeDribble http://www.aleablog.com/the-cds-big-bang/#comment-2794 DerivativeDribble Tue, 31 Mar 2009 14:23:16 +0000 http://www.aleablog.com/?p=3010#comment-2794 JCK, Contrary to the opinion of many, occasionally we do add value =). JCK,

Contrary to the opinion of many, occasionally we do add value =).

]]> By: -jck http://www.aleablog.com/the-cds-big-bang/#comment-2793 -jck Tue, 31 Mar 2009 14:20:39 +0000 http://www.aleablog.com/?p=3010#comment-2793 DD: I guess you are a lawyer ;_) You are right, it's not out, the standard is just ‘No R’ For legacy CDS, liquidity won't vanish overnight but it will over time and you would want to bailout of trading positions but not "for keeps" positions, to be safe. DD:
I guess you are a lawyer ;_)
You are right, it’s not out, the standard is just ‘No R’
For legacy CDS, liquidity won’t vanish overnight but it will over time and you would want to bailout of trading positions but not “for keeps” positions, to be safe.

]]> By: DerivativeDribble http://www.aleablog.com/the-cds-big-bang/#comment-2792 DerivativeDribble Tue, 31 Mar 2009 14:11:40 +0000 http://www.aleablog.com/?p=3010#comment-2792 JCK, I'm pretty sure restructuring will still be as liquid in the short term as it is now. The dealer I spoke to said that cutting out NoR is a long term goal and that dealers would continue to provide liquidity for CDS with Restructuring, at least in the short term. My central point was that it's definitely not "out" the way that the auction hard-wiring is "in." It's still contemplated by the ISDA definitional structure. JCK,

I’m pretty sure restructuring will still be as liquid in the short term as it is now. The dealer I spoke to said that cutting out NoR is a long term goal and that dealers would continue to provide liquidity for CDS with Restructuring, at least in the short term.

My central point was that it’s definitely not “out” the way that the auction hard-wiring is “in.” It’s still contemplated by the ISDA definitional structure.

]]> By: jck http://www.aleablog.com/the-cds-big-bang/#comment-2791 jck Tue, 31 Mar 2009 14:10:25 +0000 http://www.aleablog.com/?p=3010#comment-2791 Gabriel: I don't know how it will evolve, the whole point of the new "hardwired" market conventions is that you won't have to haggle with dealers about what recovery to use, what curve ..etc...sure you can use your own model for hedging, but the auditors, I suspect, will look at what is widely used i.e. the standard model and won't be sympathetic to whatever price your own bespoke model spits out. Once you agree on the quoted spread with the dealer, there is no room for fuzzy pricing, the standard model does it. Gabriel:
I don’t know how it will evolve, the whole point of the new “hardwired” market conventions is that you won’t have to haggle with dealers about what recovery to use, what curve ..etc…sure you can use your own model for hedging, but the auditors, I suspect, will look at what is widely used i.e. the standard model and won’t be sympathetic to whatever price your own bespoke model spits out. Once you agree on the quoted spread with the dealer, there is no room for fuzzy pricing, the standard model does it.

]]> By: jck http://www.aleablog.com/the-cds-big-bang/#comment-2790 jck Tue, 31 Mar 2009 14:03:25 +0000 http://www.aleablog.com/?p=3010#comment-2790 DD: Sure it is available, but it won't be "standard". People are still allowed to deal in bespoke CDS and they can do what they please for a price. DD:
Sure it is available, but it won’t be “standard”. People are still allowed to deal in bespoke CDS and they can do what they please for a price.

]]> By: DerivativeDribble http://www.aleablog.com/the-cds-big-bang/#comment-2789 DerivativeDribble Tue, 31 Mar 2009 14:00:29 +0000 http://www.aleablog.com/?p=3010#comment-2789 JCK, That's the case for SOME indexes, not all, and is not part of the Big Bang Protocol or the new ISDA definitional structure. Restructuring is certainly still available for single name CDS. According to people I've talked to NoR is aspirational at this point, where as the 100/500 and fixed trading dates are happening without question across the board, at least at the dealer level. JCK,

That’s the case for SOME indexes, not all, and is not part of the Big Bang Protocol or the new ISDA definitional structure. Restructuring is certainly still available for single name CDS. According to people I’ve talked to NoR is aspirational at this point, where as the 100/500 and fixed trading dates are happening without question across the board, at least at the dealer level.

]]> By: Gabriel http://www.aleablog.com/the-cds-big-bang/#comment-2788 Gabriel Tue, 31 Mar 2009 13:55:41 +0000 http://www.aleablog.com/?p=3010#comment-2788 Jck, I disagree. That model, as you pointed out has a lot of oversimplifying assumptions, and, as you say it should be used just for communicating prices, rather than to really value your CDS book, and, more importantly to determine the hedging strategy. I think that it could be considered as a sort of BS for vanilla options. You can still talk to counterparties, and rather than telling them your price you can tell them your implied BS vol. That doesn't prevent you to use internally something more sophisticated to build your hedge. Jck,
I disagree. That model, as you pointed out has a lot of oversimplifying assumptions, and, as you say it should be used just for communicating prices, rather than to really value your CDS book, and, more importantly to determine the hedging strategy. I think that it could be considered as a sort of BS for vanilla options. You can still talk to counterparties, and rather than telling them your price you can tell them your implied BS vol. That doesn’t prevent you to use internally something more sophisticated to build your hedge.

]]> By: -jck http://www.aleablog.com/the-cds-big-bang/#comment-2787 -jck Tue, 31 Mar 2009 13:52:54 +0000 http://www.aleablog.com/?p=3010#comment-2787 DD: As far as I know, the standard restructuring clause will be ‘No R’. that's already the case for most indices and HY names. DD:
As far as I know, the standard restructuring clause will be ‘No R’. that’s already the case for most indices and HY names.

]]>