The fear of being naked

The industry is not finding it easy to give up termination rights

duncan-wood

To help fix the too-big-to-fail problem, regulators are asking a group of 18 dealers to do something that does not come naturally – give up a deeply out-of-the-money put option.

The option in question is embedded in the International Swaps and Derivatives Association's master agreement, and allows trades to be terminated in the event of a counterparty defaulting – the surviving party can cut and run, without being dragged into drawn-out, messy bankruptcy proceedings.

It's an option that was exer

To continue reading...

You must be signed in to use this feature.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: