Zubin Jelveh submits:

In February, Barlcays estimated that if one major institution went down, there would most likely be between – billion in losses due to counterparty risk in the credit default swap market as risk was repriced. A similar CDS study by BNP Paribas put the figure at 0 billion in potential losses.

But the repricing of risk extends just beyond the CDS market, IMF economists Miguel A. Segoviano and Manmohan Singh argue in a new working paper. Using data on banks’ counterparty positions before the Bear Stearns collapse, the pair calculate the potential loss to the financial system from a repricing of risk across the entire OTC derivatives market:

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