Credit Default Swaps

What is a CD?

Credit default swaps are derivative contracts. Invented in the late 1990s, they are a form of insurance for bonds issued by companies or countries that are bought and sold by investors. In 2007, the market was huge, about $50 billion (£33 billion), unregulated and opaque.

If the issuer has trouble paying, the price of your CDS will rise because the bond is riskier and insurance more expensive.

Bond investors can use CDS contracts as standard insurance or sell them individually as CDS.

The current concern is related to CDS on government bonds.

What about the ban?

The argument against CDS contracts is often explained with the use of home insurance as an example: it is impossible to insure someone else's house because then you have a financial interest in burning it down.

Investors not interested in the underlying bond can buy and sell CDS and profit from its demise.

Greek Prime Minister George Papandreou accused speculators trading Greek bond CDS contracts of inflating the costs his government has to pay to raise funds.

Regulators such as Lord Turner's Financial Services Authority and many European politicians have pointed the finger at rogue speculators and their CDS swaps to exacerbate Greece's problems and drive up the country's borrowing costs. European Commission President José Manuel Barroso believes speculative CDS trading was an aggravating factor in the Greek debt crisis.

How can a CDS ban work?

CDS contracts are not banned, only CDS swaps on government bonds.

To monitor the CDS market, it may be necessary to ensure that all trades take place on a recognized market.

What contradicts?

CDS fans say the contracts don't move the market, they simply reflect fears and allow for a more accurate risk assessment.

A study published by German financial regulator Bafin suggests that CDS trading has had little effect on the crisis facing Greece.

Literal Meanings of Credit Default Swaps

Credit:

Meanings of Credit:

Trust the truth of something that has been said or trusted.
Recognition and respect.
Recognition of achievements, especially in the performing arts.
(TV/movie, usually plural) Written titles and other information about a TV show or movie that airs at the beginning and/or end of the TV show or movie.
Default privilege granted to a buyer or borrower based on the seller's or lender's belief that the amount provided will be repaid.
The term allotted for payment of an item sold in trust.
The creditworthiness or solvency of a person, represented by his history of debt and payment (or default).
Addendum to certain accounts, the side of the account on which received payments are posted.
(Tax Accounting) Reduction of tax debt or refund of overpaid taxes.
Source of value, distinction or honor.
An arbitrary unit of value used in many token economies.
Recognition for completing a course (class).
Course Credit, Credit Hour – Used to measure whether enough courses have been completed to earn a degree.
Believe to believe.
Add to account.
Acknowledge the contribution.
Bring honor or bring reputation Bring honor to rank up.

Sentences of Credit

He was five minutes late, but still worked ten minutes at the end of his shift.
She received recognition as a singer in the operetta last year.
They kissed and then the credits rolled.
We are happy to provide additional credit based on your payment history.
Long credit or short credit.
What does it mean that my credit score is not good?.
Didn't you know that if you use the 45(B) General Business Credit, the IRS will refund your overpaid payroll taxes?.
This engineer gives credit to the team.
Repairing a Star Cruiser costs 100,000 credits.
If you don't show up for class, you won't get points for class, no matter how well you do in the final.
Dude I need 3 more credits to graduate. I can take sociolinguistics in Swahili if I want.
Someone said there were over 100,000 people, but I can't believe it.
Debtors for the invoice amount.
Give the point guard some credit with another pass.

Synonyms of Credit

believe, accept

Default:

Meanings of Default:

State of dereliction of duty.
Programming parameters of the original software set at the factory.
Damage caused in the event of a non-compete clause.
A choice made in the absence of an alternative.
The value used when no one has received a preliminary value or an accepted norm.
Failure of the suspect to appear and responding to the summons and complaint.
Failure or failure to do what must be done is failure to do what duty or law requires.
Missing absence.
Felony felony felony.
Breach of an obligation.
Losing the match due to lack of participation.
Value assumption when nothing is given to accept a provisional or default value.
Absence or response to the subpoena and complaint.

Sentences of Default

You have not made your payments on time and now you are overdue.
Teams with three defeats include a strikeout.
The man became the leader of the group by default.
If you don't specify the number of elements, the default value is 1.
This evil happened because of the rulers.
If you do not pay, you will not repay the loan.
If you refuse to wear the correct uniform, you will not be allowed to participate and you will lose that competition.
If you don't specify the number of elements, the default value is 1.

Swaps:

Meanings of Swaps:

Change or give (something) in exchange (for something else).
Knock Knock.
Clap the air or flap the wings with a swinging motion or flapping sound.
Tumble or fall to run cool or furious.
Exchange of two similar things.
A derivative financial instrument in which two parties agree to exchange one cash flow for another.
Free space in the paging file to use as auxiliary storage.
One shot, one shot.