Joint default losses lower than expected

The credit crisis and near-collapse of Bear Stearns in March has focused risk managers on the dangers of a joint default scenario - the risk that a large issuer and a major bank could default at the same time, forcing a huge swath of credit derivatives contracts to be unwound. However, bank research suggests the scale of losses in such as event would be smaller than many risk managers fear.

In research published on May 13, Citi estimated the losses on outstanding credit default swaps (CDSs) from

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