View Full Version : Systemic risk rises: correlation hits new highs

02-14-2008, 03:54 AM
The ever insightful Alea points us in the direction of rising correlation on credit indices.

Reuters reports that correlation - a measure of systemic risk - appears to be increasing:

Correlation sets a price on the marketís fear that a few bad apples will default versus its fear of an economic cataclysm...

Systemic risk rises: correlation hits new highs (http://ftalphaville.ft.com/blog/2008/02/13/10890/systemic-risk-rises-correlation-hits-new-highs/)

See also "Very Good Credit Default Swap Article" thread:

If the correlation numbers correspond to real-world conditions, then they're essentially saying that if any companies start defaulting, then all companies are liable to start defaulting.

Chart of the Day: Debt Tranche Correlation (http://www.portfolio.com/views/blogs/market-movers/2008/02/12/chart-of-the-day-debt-tranche-correlation)