The ISDA conducted a survey to try and establish the level of counterparty risk. The benchmark year that they compared it to was 2003. Some rather interesting facts emerged from this survey.
Total CDS in 2003……………………………………$2,687.91 Billion
Total CDS in 2007…………………………………..$45,464.50 Billion
Net exposure [unhedged] 2003……………..14.5%
Net exposure [unhedged] 2007……………..10%
After additional collateral 2003……………..1.4%
After additional collateral 2007………………2%
Potential losses 2003……………………………..$37.6 Billion
Potential losses 2007……………………………..$909.3 Billion
Number and Type of firms included in Survey;
Banks/Broker Dealer’s…………………………………77
Insurer’s……………………………………………………..2
Corporate…………………………………………………..2
Mutual Fund………………………………………………1
Hedge Funds……………………………………………..1
Pension Fund……………………………………………..1
Statistically, this doesn’t amount to a row of beans [ISDA also say this] That counterparty risk can be inferred to be “under prudent levels” is simply a joke. The plain fact of the matter is that no-one has the faintest idea who, what, where, the exposures lie.
