UBS is suing Paramax Capital International over a hedge gone bad, part of an avalanche of litigation between parties in the opaque $63 trillion CDS market. Last year, UBS turned to Paramax to buy protection on $1.3 billion of highly rated slices of a CDO comprising subprime residential mortgages that UBS underwrote. Now that the securities have lost value, UBS is trying to make Paramax to pay up, while Paramax is charging UBS with negligent misrepresentation.

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