Credit Default Swap

CME OTC Credit Default Swaps

mad_monkey

(Chimp, 4

Points)

on 3/18/13 at 3:45pm

Has anyone used CME's OTC CDS trading solution? I'd really like to hear about your experience if you have.

cmegroup (dot) com/trading/cds/

What Is A Credit Default Swap (CDS)?

A Credit Default Swap (CDS) is a financial instrument that is effectively insurance on a bond. The idea behind them is that the owner of a CDS pays a certain amount per year (interest rate basis points) and if the asset that is backed by the CDS defaults, the CDS owner is paid off.

A bond is valued at 100 (par) and the CDS will pay the difference between the market value of the bond and par at the time of default, i.e. if bondholders receive 20 cents on the dollar the CDS will pay 80 cents per dollar.

Originally they were used as an insurance or hedging policy, but due to the fact that you do not have to own the asset in order to buy a default swap on it, they have become tools for relatively cheap speculation.

10k bet on Greek default

mk2012

(Monkey, 64

Points)

on 7/12/11 at 3:51am

I have about 10k in disposable savings and a pretty strong view Greece will default within the next month. How would you guys go about (potentially) making as much money on a Greece default?
As far as I know CDS aren't available to non-institutional investors (besides being really expensive at this point), what other options do I have?

Belgium: The forgotten pig

16rl

(Senior Orangutan, 427

Points)

on 3/24/11 at 7:44am

We are all well aware of the famous PIGS countries, but we seem to forget one tiny country in Europe. Yes, the one without any government since 284 days (and counting). The waffle & chocolate country will win the world record for not having a government, beating Iraq with 289 days. Good job Belgium!

While some people decided to take it to the streets in order to tell the politicians to "get a move on", others are getting more desperate to create political parties, such as Tania Derveaux which offered a blowjob to everybody that would vote for her. The required votes to start a political party is 40 000. That's what I call commitment.

It could happen to you

Jorgé

(Neanderthal, 2,182

Points)

on 12/2/10 at 6:13am

There are myriad reasons to go into finance; some do so out of love, some do it out of spite, some do it for the prestige, while some, the vast majority for that matter, do it for the money.

Thousands of monkeys head down to Wall Street every year, not for the hundreds of thousands they’ll be making slaving it out in FiDi or in Midtown, but for the fucking billions they could potentially earn in the future.

But what if the money didn’t matter?

My Big Fat Greek Default

Edmundo Braverman

(Human, 14,408

Points)

on 2/11/10 at 6:14am

The markets have been choppy of late, due in no small part to the bit of drama playing out in the EU right now. A couple of EU nations are against the ropes in a big way, and there doesn't seem to be a coherent plan in place yet to deal with this next step of the crisis.

At the center of the problem are Greece and Spain. Greece is in worse shape than Spain, but not by a whole lot. And the Greeks have some serious problems with government transparency. Problems that were evidently exacerbated by a little monkey math on the part of Goldman Sachs.

It is being reported that Goldman helped the Greek government circumvent the Maastricht rules requiring full disclosure of financial condition by engineering a clever swap that enabled the Greek government to borrow money off the books. In fairness, they're not the only investment bank to do this, just the most famous.