“Counterparty Woes Still Front And Center”
In the December 28, 2009 edition of Derivatives Week, Booz & Company Senior Associate Chuck Lyman (North America) said that fears of counterparty risk—the risk that the other party in an agreement could default—will continue as a top priority for sellside and buyside firms in 2010. Although the fears of counterparty risk were somewhat allayed in 2009 after a tumultuous 2008, Lyman said that the failure of Lehman Brothers continues to loom large and cause firms to question the stability and longevity of their trading partners. “Firms have to prove to the market they can identify they are a good credit risk, and if they are able to demonstrate that investors are more willing to give them capital,” said Lyman. “In the end, if you are in a new world where nothing is guaranteed around you, it’s up to you to discount on your own the strength of any arrangement you are in.”