[jermeh]

It's worth noting that these funds blowing up causes large sell-offs of their other holdings, which can in turn cause prices of those assets to fall. Falling prices can cause more sell-offs, and can spiral. Nobody really knows what's going to happen as a result of this since it's pretty unprecedented. IIRC the SPX is down ~3% and VIX is up 60% today.

[majormajor]

"A few firms losing a bet can spiral into huge effects," if true, sounds like a really, really, really good argument for eliminating higher-risk instruments.

"We don't know how bad things we could get if we are wrong" means you're doing something you shouldn't be.