On 8/28/07, Sabri Oncu <[EMAIL PROTECTED]> wrote: > Here are some random thoughts: > > 1) The size of the sub-prime market is between $2 and $3 trillions: this is a > lot by any standard. > > 2) Suppose for a while that the default rate in the sub-prime mortgage market > is 3%. Only this amounts to defaults of $60 to $90 billions, which is again a > lot by any standard: this is at the same order with the amount of foreign > money > invested in Turkish Stocks and Bonds.
While doing these numbers, we should also remember that a default is not a 100% loss. I'd guess in a bad case (foreclosure+auction), it might be a 25-30% loss. The total losses on the real-estate markets itself may be "only" about $30B or so. The real problem seems to be all the debt that was issued with these mortgages as collateral (and even worse related CDOs; default in underlying mortagages could very well mean almost 100% loss in these instruments). Who knows maybe there is trillions of debt on this collateral. -raghu.
