What would you like to discuss? Obviously,notionals do not equate to risk directly. Though they form the starting point to calculate and ultimately control risk.
I'm quite sure that there is little interest or understanding here on the amount of risk involved in the ether of derivative contracts. The notional value amounts that are bandied about, should at the very least make one wonder what this is all about. Just because talk of hundreds of trillions is so unreal, the numbers are dismissed as fantasy.
Most people have no idea of:
- The hundreds of different types of derivative contracts.
- The slicing and dicing of agreements that are backed by mathematical formulas that can run to five pages, mostly based on initial ratings that often have no basis in research... or reality.
- What part of their lives are invested in derivative agreements that will vary for 30 years in the future.
- Why Credit Default Swaps? Why not "shares"?
- Who holds these investment instruments? Pension Plans, Insurance Companies, Endowment funds, Cities, Municipalities, Banks...
- That the people on the governing boards who oversee investments (above)
have little or no idea of the risk level, other than what the broker tells them.
- How are derivatives settled? Payouts over days, months, years, decades.
- Why individuals don't trade derivatives?
- What happened when Warren Buffet tried to unravel the General E accounts
Derivatives, as Accused by Warren Buffett - NYTimes.com
- The virtual impossibility of knowing... the basis of valuing accounts.
- The darkness of the trading rooms. Even with the proposed new regulations.
- What part of the assets of the five largest banks is invested in derivative accounts.
- The CFTC has virtually no control over derivative trading, despite recent legislation.
- What Brooksley Born warned about.
These issues hardly scratch the surface of concern.
It is much easier to brush off "impossible" numbers than to really understand the threat to the world economy. That's the attitude of our Congress.
Complicit in all of this, is the mainstream media, which shrinks down the word "derivatives" and wraps it in cotton candy, effectively taking it out of the public consciousness.
Often better to let the sleeping dog lie.