Archegos revives Lehman-era trade booking controversy

Experts debate whether defaulted TRS positions should have become house exposures immediately

Large derivatives counterparties rarely default, but when they do, cleaning up the mess can be a fraught process. Dealers must close out trades, realise collateral and deduct any residual losses from capital. Potentially costly, but unambiguous.

However, Credit Suisse’s handling of the Archegos default in 2021 has revived a controversy – one that first arose after the fall of Lehman Brothers, but was never resolved – over how trades should be booked while they’re being closed out.

One former

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