Soaring Default Spreads Sock a Swap Seller

Over the past two years, derivatives veteran Tom Jasper bet the farm by going long credit risk. Now, his firm's $23 billion credit portfolio is losing hundreds of millions of dollars per quarter as corporate credit fears multiply.

The wild part of the story is that Jasper is not a hedge fund manager, and he still has a job, despite such abysmal performance. As CEO of Primus Guaranty(PRS Quote), Jasper remains safe and well-paid, while the company's stock has tumbled to $4 from its $13.50 IPO price in 2004.

Primus Guaranty -- which reported a $404 million loss in the fourth quarter, its largest ever -- remains a relatively unknown company that is nonetheless a major player in the credit default swap market. Primus essentially does only one thing: sell credit default swaps on single-name corporate bonds. ...