Untangling credit default swaps
When the analysts and experts talk about the current financial crisis, they often refer to confidence default swaps. So, what exactly is a confidence default swap? Market Senior Editor Paddy Hirsch goes to the whiteboard for this explanation.
Thank you. You made the concept very simple to know.
Awesome video, i did a search on wiki and other investor sites but was still baffled. You clarified it well. Thank You
W. Buffett owns 20% of Temperamental’s
very simple to know
Why do “teachers” have to make simple things so intricate? A confidence default swap is a bet against the failure of whatever it’s written against. $50 Trillion dollars worth of these things were written against American Home Mortgages. -Now, do you reckon the men on Wall Street who invented these things, and spent billions of dollars buying them have an interest in seeing you default on your finance? -THINK about it, because this guy will do nothing but lead you in circles.
well …
the real problem of that system has not been tackled in my opinion !
The Rating company also has a intrest in these deals … who is watching the rating companys ?
No major changes have been implemented !
WHY NOT ???
Brgds
GSO
collateral exists to reimburse the creditor / customer in the event institution is unable to honor its commitments, i.e. it defaults. In other words it guarantees you will be paid back in any situation. As for sam expecting gm to fail, i suppose in that case he can effectively rip off jim, but in the end theyll both loose money unless possibly sam was in a bet and being paid by someone else.
I want to pull off the largest CDS scam in history.
WHO WANTS TO JOIN ME AND BECOME RICH?!?
p.s. fantastic teaching, fantastic vid,
5/5
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
impressive!
simple solution – no insurable interest on the respective financial instrument means you cannot buy a confidence default swap on that instrument
yep – you don’t have to own the underlying bonds to trade the CDS
is it also doable that jim could have bought a cds without owning any bonds from gm?
would someone please give reasons for the purpose of the collateral. also, what is the gain of jim buying bonds in gm motors with the expectation it will fail?
Lame. this doesn’t really give reasons for the fraud. We want to know who is the real victim. We want to know who is being wronged by this practice. Is there anyone with common sense any more?
cds IS insuring the entire risk 500k is just the collateral. The entire amount is supposed to be paid back in order to make the insured “whole”. Companies like AIG were taking on more than they could soubriquet. When generous corps like GM go south they may or may not be able to cover everyone’s losses. When they are forced to go public no one knows if they’ll be made whole or not…thus causing a panic. I’m not an expert…but that seems to be the case to me.
what I reckon is… Jim needs to pay the difference to Sam. the collateral is only an safeguard for Sam when Jim is down rated or even default. I’m not quite sure… do varify me
Thank you, Thank you! I finally get what happened. Even CNBC didn’t give reasons for it so clearly in their layperson specials.
Very comprehensive video, thank you for the service.
So then the confidence default swap is only insuring up to the collateral and not the full amount os the loss?
500k. The collateral is still Jim’s, it’s just to demonstrate that he will be able to cover his debts.
I need someone to help clarify a part. In the develop, Jim has to place 500k collateral. So if the 5 million investment goes down to 4 million, will Jim have to pay the 1 million difference or will it only pay 500k?