Saturday, 14 April 2012

Teaser: How to ruin a wonderful, gargantuan business like AIG?

Based on the 2007 Annual Report, SIG's notional exposure to AIGFP supersenior Credit Default Swaps (CDS) portfolio is $527bn, in exchange for about $200mn of premiums (or revenues) per annum. Total premiums in 2007, by the way, is $79bn.

(1) It's unbelieveable that they called the CDS portfolio 'supersenior'!
(2) $527bn is more than 5 times shareholders' equity, then in 2007.
(3) Maybe, the AIG meltdown in 2008 is not so black-swan-like after all.

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