Even as every passing day unravels a little more of the underlying forces at work – the complex nature of the derivatives used; the high degree of leveraging on poor, light or even absent collateral; the underestimation of risk pervading financial markets; the surprisingly sizeable exposures of large financial institutions to some of the debt instruments and derivatives in question; and the speed of contagion – I believe that we still have to travel much further before we understand the full import of these recent events in terms of both information and analysis.
Consequently, there is considerable uncertainty surrounding both debt and credit markets as of now. Quite justifiably, regulators, monetary authorities and finance ministries are all engaged in containing the risks posed by these developments.