Lehman auction settles at 8.625%
The credit event auction for Lehman Brothers fixed a price of 8.625% for CDS contracts involving the failed US bank. The auction, administered by Creditex and Markit in accordance with the standard Isda protocol, enabled market participants to cash-settle triggered contracts which included single-name, index, bespoke tranche and other credit derivatives transactions. Pressure has mounted on the credit event auction process in recent weeks following the defaults of the GSEs Fannie Mae and Freddie Mac, and Lehman Brothers, Washington Mutual. Market participants are looking to solve this problem by setting up a central counterparty clearing house for CDS.
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