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November 24, 2009
An explanation of Credit Default Swaps (CDS) – Part 2
In part two of our explanation of credit default swaps, we provide an alternative analysis or framework for understanding CDS that revolves around its similarities and differences to traditional insurance products. While there are a few major differences between traditional insurance agreements and credit default swaps, it helps to initially understand similarities between the use and purpose of both insurance and CDS beforehand. Then we take a look at some of the common beliefs or misconceptions surrounding CDS and other derivative or financial products and separate fact from the fiction.
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November 17, 2009
An explanation of Credit Default Swaps (CDS) – Part 1
Credit Default Swaps (CDS) can sometimes be one of the most confused and misunderstood financial products ever since their overly publicized role in the advent of the so-called credit crisis and the fall of large institutional firms such as AIG, Bear Stearns and Lehman Brothers. What exactly is a credit default swap and how does it work? Rather than concern ourselves with a myriad of technicalities and exceptions or into specifics of legal documentation, theoretical pricing models, statistical risk measurements or detailed trading strategies, we will try to focus on the big picture of what these products really represent and how they are making a difference in the evolving world of banking and finance.
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November 9, 2009
BusinessWeek confusing the swaps: Credit Default Swaps versus Interest Rate Swaps
When the public’s trusted guardian angels from demonized devils of financial products, the popular media, confuses their swaps, it is a telling example of the mass confusion that plagues Main Street’s understanding of these derivatives since the public really cannot be blamed for their confusion or lack of understanding either. A famous magazine recently ’swapped’ their verbiage around by referring to interest-rate swaps as credit default swaps when explaining the recent swaps fiasco in Jefferson County, Alabama. CreditLime tells you exactly what the difference is between an interest-rate swap and credit default swap and a brief explanation of the situation in Birmingham, Alabama.
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November 4, 2009
Telus
Telus is the focus feature of this week’s CDS watch. The company saw gross notional values and number of contracts rise over the past week while net notional was virtually unchanged. All this activity comes on the heels of an upcoming quarterly earnings announcement later this week.
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