O Brothers, where art thou?

The bankruptcy of Lehman Brothers, coming on the back of the conservatorship of Fannie Mae and Freddie Mac, sent market participants rushing to compute their exposures and replace affected hedges. How did the market bear up? By Peter Madigan and Nick Sawyer

September 2008 is likely to come to be regarded as one of the grimmest and most volatile months ever experienced by Wall Street and financial markets generally. As dramatic as such an observation may seem, the events of the past month tell their own story. With the collapse of a major dealer, derivatives counterparties have been forced to quickly assess the size of their exposures, unwind trades where possible and find new counterparties with which to replace hedges they had conducted with