Why do single banks write down 10s of billions while global net expected loss is 15bn? I have no opinion on where the flaw in this logic is but these could be some indications:

- There is no clear distinction between CDS, CDOs, and traded tranches.
- Cash CDOs have no swap behind them and cannot be easliy offset. The net exposure is the CDO notional.
- The 50tn figure is based on CDS with ISDA docs which covers mainly investment grade and speculative grade corporates and sovereigns. Subprime or any other exposure would then not be counted.
- Hedging is an abused term in the credit world where it often does not mean "hedging" but something more that "we offset our BBB exposure in XYZ with a BBB exposure in ABC".
- A five year cumulative default probability of 2% can only be assumed for investment grade corporates according to publicly available cohort analysis.