10 years of Lehman: The risk of derivatives isn't gone, it's merely morphed

The problem child of the 2008 financial crisis now lives in central counterparties

Markets have served a timely reminder of the latent risk from derivatives — the wild beasts of finance. Ten years after the collapse of Lehman Brothers Holdings Inc., almost to the day, a private trader and one of Norway’s richest men suffered 114 million euros ($132.6 million) of losses on energy-futures positions traded on Nasdaq.

The default ate through around two-thirds of Nasdaq’s mutual default fund, using up several layers of protection. Members of the clearing house must now make substantial cash contributions to rebuild that cushion. 

Given derivative-market and counterparty credit risk of $13 trillion, the losses were relatively small and