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In which alternative reality does it make sense to assume away contingent liabilities? Clearly, if you want to do reality-based accounting, you need to include all contingent liabilities as actual liabilities until and unless you can make a reasonable (as in actuarial) case that either

a) the contingency that would turn the contingent liability into an actual liability will not occur or

b) you have enough uncorrelated [NB! losses on financial assets can never be assumed to be uncorrelated] assets to simply apply a uniform haircut.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Apr 21st, 2011 at 02:15:01 PM EST
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