Hello,
I understand the idea of Hull's concept of netting: if a counterpaty defaults on one obligation it defaults on all obligations with that counterparty, but couldnt this concept be used to its advantage in a immoral way?
For instance, lets say there are 10 contracts outstanding between myself and another counterparty. I am in the money on 9 and out of the money on one. I could decide to default on the one where I am out of the money and then all other contracts would have to be paid up even if they may eventually turn in the other direction.
Is this really what would happen?
Thanks!
Shannon
I understand the idea of Hull's concept of netting: if a counterpaty defaults on one obligation it defaults on all obligations with that counterparty, but couldnt this concept be used to its advantage in a immoral way?
For instance, lets say there are 10 contracts outstanding between myself and another counterparty. I am in the money on 9 and out of the money on one. I could decide to default on the one where I am out of the money and then all other contracts would have to be paid up even if they may eventually turn in the other direction.
Is this really what would happen?
Thanks!
Shannon
