Trillion Dollar Ticking Derivatives Time Bomb to Explode Under Bankrupt Banks – Total equity at the five banks is $737 billion. So if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that at risk money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.
If 2% of derivatives are “at risk” and 10% of those bets go bad, you’ve wiped out $400 billion or nearly HALF of the banks’ equity.
If 4% of derivatives are “at risk” and 10% of those bets go bad, you’ve wiped out ALL OF THEIR EQUITY and they go to ZERO.
Suffice to say derivatives are a HUGE time bomb waiting to go off.
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