Global Macro Trading Journal

[darkhorse]

Quote from Martinghoul:

There's actually quite a few papers out there discussing the possible mechanics of a monetary union breakup and all the lex monetae stuff. People have been trying to come up with scenarios for this for a while now. Not that there's any more clarity as a result.

Cheers for that -- "lex monetae," what a wonderful term. Not sure how I missed it previously.

Did a quick search and found this:

http://ftalphaville.ft.com/blog/201...ts-and-abstractions-of-a-euro-redenomination/

Which more or less seems to fit this caveman trader's instincts...

 

[Martinghoul]

Quote from darkhorse:
Cheers for that -- "lex monetae," what a wonderful term. Not sure how I missed it previously.

Did a quick search and found this:

http://ftalphaville.ft.com/blog/201...ts-and-abstractions-of-a-euro-redenomination/

Which more or less seems to fit this caveman trader's instincts...

Yep, the Nomura paper is one of the latest iterations. There were a lot before that including the working paper from the ECB chief legal counsel: http://www.ecb.int/pub/pdf/scplps/ecblwp10.pdf

Unfortunately, while one can try to construct many scenarios, this really does belong in the "unknown unknown" territory. There are some interesting attempts to look at the history of currency union breakups.

This is the blog post from Hempton that I have referenced a few times:
http://brontecapital.blogspot.co.uk/2011/09/models-for-greek-sovereign-default.html

This is the UBS paper from Stephane Deo that someone has put online:
http://slon.ru/images/infographix/voynarovskiy/111013 breakups/A brief history of breakups.pdf

This is the Variant Perceptions piece:
http://blog.variantperception.com/2012/02/16/a-primer-on-the-euro-breakup/

 

[ammo]

Quote from Martinghoul:

There's actually quite a few papers out there discussing the possible mechanics of a monetary union breakup and all the lex monetae stuff. People have been trying to come up with scenarios for this for a while now. Not that there's any more clarity as a result.

when other countries have defaulted or say the US forgave 40 billion in debt to brazil,i'm not sure,asking, were there several derivitaves a.k.a. godldamn sachs that would still be expecting to collect,in other words,making the forgiveness of debt impossible

 

[Martinghoul]

Quote from ammo:
when other countries have defaulted or say the US forgave 40 billion in debt to brazil,i'm not sure,asking, were there several derivitaves a.k.a. godldamn sachs that would still be expecting to collect,in other words,making the forgiveness of debt impossible

There's always holdouts. Every time it's different and depends on the outcome of a lot of negotiations.

 

[ammo]

but arent there a massive amount of complicated derivitaves built around the debt that were never there in past debacles

 

[Martinghoul]

Quote from ammo:
but arent there a massive amount of complicated derivitaves built around the debt that were never there in past debacles

Not really... If we take Greece as a guide, there was only a $3bn net sov CDS position out there when PSI occurred. The volume of derivatives is still dwarfed by the size of the bond market.

 

[ammo]

thanks

 

[ralph00]

Quote from Martinghoul:

Not really... If we take Greece as a guide, there was only a $3bn net sov CDS position out there when PSI occurred. The volume of derivatives is still dwarfed by the size of the bond market.

A bit misleading. CDS positions were larger by several multiples, but had been wound down over the 2 year song and dance leading up to the PSI.

 

[ammo]

i was under the impression that a lot of insurance derivatives were created for investors to cover the euro being no more, the query is if they decided to forgive debt,erase it, how would the insurance policies be dealt with..i thought it was overleveraged derivatives that brought us down in 08..i.e...selling 5 million dollar bonds on mortgage packages that were unregulated ,possibly selling the same mortgages to several buyers..if the same scenario were to set itself up,how would these derivatives be unwound

 

[darkhorse]

doh!

Socialist Hollande triumphs in French presidential poll

Left-wing candidate François Hollande has defeated incumbent Nicolas Sarkozy in Sunday's runoff, exit polls say, becoming the first Socialist to win a presidential election since François Mitterrand in 1988.