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Consider This Before You Buy Lemonade

·5 min read
Consider This Before You Buy Lemonade
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Archegos Capital Management's recent meltdown shines a light on a fact of life that financial companies don't like to talk about: counterparty risk. Briefly, Archegos was a hedge fund that used derivatives to add leverage to its positions. When Archegos' investments plunged and the fund blew up, the banks that lent to it were on the hook for their counterparty's losses.