Friday, October 24, 2008

Perspective: credit default swaps

Time from March 2008 gives perspective on the ginormousnous of the credit default swap market: The CDS market exploded over the past decade to more than 45 trillion in mid-2007, according to the International Swaps and Derivatives Association. This is roughly twice the size of the U.S. stock market (which is valued at about $22 trillion and falling) and far exceeds the $7.1 trillion mortgage market and $4.4 trillion U.S. treasuries market, notes Harvey Miller, senior partner at Weil, Gotshal & Manges. "It could be another — I hate to use the expression — nail in the coffin," said Miller, when referring to how this troubled CDS market could impact the country's credit crisis.

Update: for further perspective, the combined world GDP is 65 trillion.

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