Untangling credit default swaps

November 15th, 2009 | by admin |

When the analysts and experts talk about the current financial crisis, they often refer to credit default swaps. So, what exactly is a credit default swap? Marketplace Senior Editor Paddy Hirsch goes to the whiteboard for this explanation.

Duration : 0:10:47


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  1. 25 Responses to “Untangling credit default swaps”

  2. By chetansingh2006 on Nov 15, 2009 | Reply

    America has turned …
    America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses

  3. By chetansingh2006 on Nov 15, 2009 | Reply

    America has turned …
    America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses

  4. By chetansingh2006 on Nov 15, 2009 | Reply

    America has turned …
    America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses

  5. By chetansingh2006 on Nov 15, 2009 | Reply

    America has turned …
    America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses

  6. By avster95 on Nov 15, 2009 | Reply

    impressive!
    impressive!

  7. By majesticteam12 on Nov 15, 2009 | Reply

    simple solution – …
    simple solution – no insurable interest on the respective financial instrument means you cannot buy a credit default swap on that instrument

  8. By mrsnail445 on Nov 15, 2009 | Reply

    yep – you don’t …
    yep – you don’t have to own the underlying bonds to trade the CDS

  9. By teffy91 on Nov 15, 2009 | Reply

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

  10. By teffy91 on Nov 15, 2009 | Reply

    would someone …
    would someone please explain the purpose of the collateral. also, what is the gain of jim buying bonds in gm motors with the expectation it will fail?

  11. By hbjon on Nov 15, 2009 | Reply

    Lame. this doesn’t …
    Lame. this doesn’t really explain 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?

  12. By jerseyjack on Nov 15, 2009 | Reply

    cds IS insuring the …
    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 handle. When large 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.

  13. By Eyunbin on Nov 15, 2009 | Reply

    what I think is… …
    what I think is… Jim needs to pay the difference to Sam. the collateral is only an protection for Sam when Jim is down rated or even default. I’m not quite sure… do varify me :)

  14. By oesterle6 on Nov 15, 2009 | Reply

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

  15. By FA9082 on Nov 15, 2009 | Reply

    Very comprehensive …
    Very comprehensive video, thank you for the service.

  16. By fukinh0t on Nov 15, 2009 | Reply

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

  17. By lateralexrex on Nov 15, 2009 | Reply

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

  18. By fukinh0t on Nov 15, 2009 | Reply

    I need someone to …
    I need someone to help clarify a part. In the example, Jim has to put 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?

  19. By learnanddeliver on Nov 15, 2009 | Reply

    Thank you, …
    Thank you, excellent analogy and explanation

  20. By rdnavarre on Nov 15, 2009 | Reply

    Absolutely …
    Absolutely EXCELLENT video!!!

  21. By utewb11 on Nov 15, 2009 | Reply

    Best explanation so …
    Best explanation so far….thank you

  22. By DarthKazi on Nov 15, 2009 | Reply

    Sort of. Except you …
    Sort of. Except you can’t sell your CDs anytime you want, whereas you can sell bonds at any time.

    Bonds are evil. The very inception of bond-based money creation is what has caused the problems we have today. The initial issuance of Lincoln Greenbacks, was done so interest-free and debt-free. After the NBA was passed a year later, all notes had to be issued with bonds attached. This caused a debt-based system of money.

    Bonds are bets against prosperity, for the most part.

  23. By 26gudia77 on Nov 15, 2009 | Reply

    beautiful
    beautiful

  24. By ottosen on Nov 15, 2009 | Reply

    Can anyone explain …
    Can anyone explain why other banks etc. are being drawn down with fx. Lehman Brothers? What’s their involvement?

  25. By shalterman on Nov 15, 2009 | Reply

    a cds is the same …
    a cds is the same thing economically has buying a bond

  26. By topmentor4u on Nov 15, 2009 | Reply

    Great! Channel and …
    Great! Channel and I look forward more informative videos. Keep It up!

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