Monday, October 20, 2008

Just a reminder on Lehman's CDS settlement

Remember how the auction to determine the payout on CDS that protects one against Lehman's default?

And it was determined that Lehman's debt worth was 9 cents on the dollar?

Therefore the payout has to be 91% of Lehman's debt?

The estimated payout is US$250b+...

Well. The auction was held that day. But pay out is tmr. 21st of October.

Lets see whose going to pay up... And whose not.

Here's an interesting piece over at Roubini's site about this pay out tmr.

Will they 'net out' so that actual amount passed over is only US$6b... Or will counterparties fail leading to another cascade of credit crisis?

I will say this. Buying puts @ 3:57pm tmr sounds tempting. Just to punt on counter party failures...

But if on Wednesday morning, no counterparty went to finance heaven, I am buying calls and holding on to them till the US presidential election.

And yes, I will also add to my silver positions too.

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