Professor: Regulators should review DVA hedging through CDS sales

03/23/2012 | (subscription required)

Damiano Brigo, a finance professor at King's College, said regulators should crack down on banks that sell credit default swaps to hedge debit-value adjustment. Brigo said the move might be fine during normal times, but during times of financial crisis, difficulties could arise. "From a spread point of view, it may be fine -- but from the point of view of jump-to-default risk, it's really crazy and exacerbates systemic risk," he said.

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