Buffett Unit’s Exodus From Derivatives Raises Questions

“There is no doubt that the less liquid and more exotic the derivatives position, the more subjective the estimate of value is. Clearly, that was an issue at Enron in some of their positions,” said Leslie Rahl, president of Capital Market Risk Advisors Inc., a New York derivatives consulting firm.

She said derivatives is “a business you either have to be in with commitment, and willing to take the risks in return for the rewards that can be repeated and willing to grow it, or it’s probably not worth the effort to do it in a small way, because you need a tremendous amount of infrastructure, whether you have one deal or thousands.”

May 10, 2002