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The Invisible One Quadrillion Dollar Equation -- Asymmetric Leverage and Systemic Risk According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland -- the central bankers' bank -- the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion. The main categories of the USD 1.144 Quadrillion derivatives market were the following:
1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.
Bear Stearns Seizes Assets From Failed Hedge Fund
Bear Stearns told investors in the two hedge funds last week that they'll get little if any money after "unprecedented declines'' in the value of securities used to bet on subprime mortgages, or loans to homebuyers with the weakest credit.
The two Bear Stearns funds had hedged their CDO bets using derivatives. When the hedges and the securities declined at the same time, the funds lost as much as 20 percent of their value, prompting clients to demand their money back and spurring creditors to seek more collateral. That forced the funds to liquidate at least $4 billion of securities in June.
Shenzhen Nanshan Power (000037.SZ) (200037.SZ) said in a statement that it received several notices from J. Aron & Company, a trading subsidiary of Goldman Sachs (GS.N), for at least $79.96 million as compensation for terminating oil option contracts. "We will not accept the demand by J. Aron for all the losses and related interests," said Nanshan, in line with the stance it took last December. "We will try our best to negotiate with J. Aron and resolve the dispute peacefully...but the possibility of using a lawsuit can not be ruled out when talks fail," it added. "J. Aron told us in one notice that if we do not pay the money, they will reserve the right to launch a lawsuit and will not send us any further notice." The State Assets Supervision and Administration Commission said in September that it would back state-owned companies in any legal action against the foreign banks that sold them oil derivatives, which resulted in losses when oil prices dived late last year. [ID:nPEK14474] A Beijing-based Goldman Sachs corporate communication official declined to comment.