Comments on: Untangling credit default swaps

By: fukinh0t

fukinh0t — Sun, 21 Mar 2010 12:53:19 +0000

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?

By: lateralexrex

lateralexrex — Sun, 21 Mar 2010 12:25:33 +0000

500k. The collateral is still Jim’s, it’s just to demonstrate that he will be able to cover his debts.

By: fukinh0t

fukinh0t — Sun, 21 Mar 2010 11:47:17 +0000

So then the confidence default swap is only insuring up to the collateral and not the full amount os the loss?

By: FA9082

FA9082 — Sun, 21 Mar 2010 11:41:08 +0000

Very comprehensive video, thank you for the service.

By: oesterle6

oesterle6 — Sun, 21 Mar 2010 11:38:01 +0000

Thank you, Thank you! I finally get what happened. Even CNBC didn’t give reasons for it so clearly in their layperson specials.

By: Eyunbin

Eyunbin — Sun, 21 Mar 2010 10:50:04 +0000

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

By: jerseyjack

jerseyjack — Sun, 21 Mar 2010 10:14:23 +0000

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.

By: hbjon

hbjon — Sun, 21 Mar 2010 09:41:31 +0000

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?

By: teffy91

teffy91 — Sun, 21 Mar 2010 09:09:06 +0000

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?

By: teffy91

teffy91 — Sun, 21 Mar 2010 08:42:35 +0000

is it also doable that jim could have bought a cds without owning any bonds from gm?