I don't agree: some mortage CDO's, corporate index CDS, tranches thereof, and all sort of other MBS are all listed stuff with delirial risks. And they will be among the first hit by the subprime meltdown. And the amounts at stakes are openly known, and they are already frightening.

I dont' mean the OTC are not another (possibly bigger) time bomb, I mean it is possible to blow up the planet by taking risk on listed stuff alone, and it has already been done, that listed bomb is cocked ready to set off.

I've seen some CDS on baskets of corporate lenders in europe which, according to some basic industry-standad default event models (thoroughly untested outside of the highly benevolent period of low refinancing rates), have their price go from zero to full pay for changes of just 1 bp at a certain threshold value of the borrower's spread. These threshold values are just a percentage point away from the present rates.

If the corresponding (listed) CDO really fares like the model suggest (symmetric of its default swap), this is going to be ugly, and it will happen, not overnight, but in just weeks as bankruptcies pile up.

Pierre