Friday, November 9, 2007

How Morgan Stanley lose money using bearish subprime bets

--Morgan Stanley bought Saxon in December to become subprime underwriting leader and used bearish subprime bet, swaps, to hedge risk --MS need to pay interest on those contracts. to offset the bearish subprime bet and help generate interest income to pay the cost of the swaps, the firm amassed the CDOs position (super senior) that produced most of the loss in Oct.

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