Scholes Advises ‘Blow Up’ OTC Contracts

Myron Scholes said regulators need to “blow up or burn” over-the-counter derivative trading markets to help solve the financial crisis. The markets have stopped functioning and are failing to provide pricing signals, Scholes, said. Participants need a way to exit transactions and get a “fresh start.” The “solution is really to blow up or burn the OTC market, the CDSs and swaps and structured products, and let us start over. One way to do that, through the auspices of regulators or the banking commissioners, is to try to close all contracts at mid-market prices.”

[Thanks to CP for the link.]