Understanding Counter Party Risk
Posted on September 15, 2008 at 00:00 AM EDT
As we write this, CNBC is reporting that Lehman Brothers, Inc. (LEH) has a notional amount of outstanding OTC positions of nearly $800 billion. Since Lehman is going into bankruptcy, what does that mean for the rest of the financial markets? Each of these trades has a counter party, an institution that is expecting to pay [...]