Deutsche Bank toxic derivative losses

phillw

antrobus wrote: »

The losses that one party makes, are matched by the gains made by the other.

You should tell that to 2008.

Crashy_Time

antrobus wrote: »

Derivatives don't 'take' anything.

The losses that one party makes, are matched by the gains made by the other.

P.S. The Apple share price is not a derivative.

Well it is derived from unsustainable hype if nothing else.

antrobus

Crashy_Time wrote: »

Well it is derived from unsustainable hype if nothing else.

Derivatives are a fairly standard financial product these days, There is no hype involved. I wouldn't suggest that any private individual got involved with them, but they are supposed to be used to manage risk, The trouble is that sometimes people think they're smarter than the market and think they can make a ton of money building up a position, only to find that they've lost a ton of money.

Such is life.:)

antrobus

phillw wrote: »

You should tell that to 2008.

Why?

As far as I can recall, no derivatives were involved in the 2008 great banking crash. It was all a result of the fairly standard 'oops we've lent a lot of money to people who can't pay it back' moment.

P.S. You may well not understand that a collateralized debt obligation is not a derivative.

michaels

antrobus wrote: »

Why?

As far as I can recall, no derivatives were involved in the 2008 great banking crash. It was all a result of the fairly standard 'oops we've lent a lot of money to people who can't pay it back' moment.

P.S. You may well not understand that a collateralized debt obligation is not a derivative.

But I guess some derivatives had been used to share some of the 'cant pay it back' risk around so losses were felt by people other than mortgage lenders and direct buyers of mortgage backed securities. For example Goldmans had basically insured the tail risk with AIG who were bailed out which in turn save goldmans….so counter party risk is real with derivative transactions even if the meaningless nominals are not.

The-Joker

michaels wrote: »

But I guess some derivatives had been used to share some of the 'cant pay it back' risk around so losses were felt by people other than mortgage lenders and direct buyers of mortgage backed securities. For example Goldmans had basically insured the tail risk with AIG who were bailed out which in turn save goldmans….so counter party risk is real with derivative transactions even if the meaningless nominals are not.

Exactly and it goes the other way as well.

It sounds great to 'share the risk' when everything is hunky dory.

Now that the markets are looking like they will dive as interest rates keep going up, the 'shared risk' is affecting everybody, right down to the man on the street.

DB is too big to fail. If they fail the repercussions will affect every other bank on Earth. The entire banking system will collapse. And right now it looks like DB is failing.

Crashy_Time

antrobus wrote: »

Derivatives are a fairly standard financial product these days, There is no hype involved. I wouldn't suggest that any private individual got involved with them, but they are supposed to be used to manage risk, The trouble is that sometimes people think they're smarter than the market and think they can make a ton of money building up a position, only to find that they've lost a ton of money.

Such is life.:)

I was talking about hype surrounding the iphone pushing Apple`s share price, it was kind of a joke. When I see an ad for derivatives in the middle of Corrie (not that I would ever be watching it) then I will know they are being hyped.

Thrugelmir

michaels wrote: »

But I guess some derivatives had been used to share some of the 'cant pay it back' risk around so losses were felt by people other than mortgage lenders and direct buyers of mortgage backed securities. For example Goldmans had basically insured the tail risk with AIG who were bailed out which in turn save goldmans….so counter party risk is real with derivative transactions even if the meaningless nominals are not.

At least the US Government made a profit on the bail out. Suggesting that the underlying situation wasn't as bad as feared once traded out. Same as Lehmans UK.

michaels

Thrugelmir wrote: »

At least the US Government made a profit on the bail out. Suggesting that the underlying situation wasn't as bad as feared once traded out. Same as Lehmans UK.

At the time there was a lot of discussion about whether it was a liquidity problem or one of solvency. Problem is once you are illiquid and can only borrow at punitive interest rates then you are also insolvent.

John_G_Jones

The-Joker wrote: »

Exactly and it goes the other way as well.

It sounds great to 'share the risk' when everything is hunky dory.

Now that the markets are looking like they will dive as interest rates keep going up, the 'shared risk' is affecting everybody, right down to the man on the street.

DB is too big to fail. If they fail the repercussions will affect every other bank on Earth. The entire banking system will collapse. And right now it looks like DB is failing.

Go on then, how would DB’s failure hurt other banks?

Every single deal they have on with other banks will b collateralised, with daily margin calls set at a zero threshold.

What’s the route to them contaminating anyone else?