It wasn’t the best of times, it quickly became the worst of times. This classic Dickens’ line sets the scene, mutatis mutandis, for a modern tale of two cities that turned to derivatives in time of need. As the old century rolls into the new, political inertia pushes both Athens and Detroit to source more debt and hedge, for better or for worse, with sophisticated derivatives. But when the market turns against them, they find their fate far worse than when they began. Act one of this story opens in Athens in 2001. The Greek government is caught between a rock and a hard place. On the one hand, they have US Dollar and Japanese Yen debt worth around $10 bn euros. On the other hand, Greece has just entered the Eurozone and is required by the Maastricht Treaty to…

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