Credit default swap

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Bloomberg Business Week 2010-07-29). Bloomberg's Terhune (2010) explained how investors seeking high-margin returns use Credit Default Swaps (CDS) to bet against financial instruments owned by other companies and countries. Intercontinental's clearing houses guarantee every transaction between buyer and seller providing a much-needed safety net reducing the impact of a default by spreading the risk. ICE collects on every trade.(Terhune Bloomberg Business Week 2010-07-29). Brookings senior research fellow, Robert E. Litan, cautioned however, "valuable pricing data will not be fully reported, leaving ICE's institutional partners with a huge informational advantage over other traders. He calls ICE Trust "a derivatives dealers' club" in which members make money at the expense of nonmembers (Terhune citing Litan in Bloomberg Business Week 2010-07-29). (Litan Derivatives Dealers’ Club 2010)." Actually, Litan conceded that "some limited progress toward central clearing of CDS has been made in recent months, with CDS contracts between dealers now being cleared centrally primarily through one clearinghouse (ICE Trust) in which the dealers have a significant financial interest (Litan 2010:6)." However, "as long as ICE Trust has a monopoly in clearing, watch for the dealers to limit the expansion of the products that are centrally cleared, and to create barriers to electronic trading and smaller dealers making competitive markets in cleared products (Litan 2010:8)."

1011: 1071:) required an $ 85 billion federal loan because it had been excessively selling CDS protection without hedging against the possibility that the reference entities might decline in value, which exposed the insurance giant to potential losses over $ 100 billion. The CDS on Lehman were settled smoothly, as was largely the case for the other 11 credit events occurring in 2008 that triggered payouts. And while it is arguable that other incidents would have been as bad or worse if less efficient instruments than CDS had been used for speculation and insurance purposes, the closing months of 2008 saw regulators working hard to reduce the risk involved in CDS transactions. 1431:

owning any debt that they wanted to insure against default. See "naked" CDS) For example, at the time it filed for bankruptcy on September 14, 2008, Lehman Brothers had approximately $ 155 billion of outstanding debt but around $ 400 billion notional value of CDS contracts had been written that referenced this debt. Clearly not all of these contracts could be physically settled, since there was not enough outstanding Lehman Brothers debt to fulfill all of the contracts, demonstrating the necessity for cash settled CDS trades. The trade confirmation produced when a CDS is traded states whether the contract is to be physically or cash settled.

1384:, one important issue was whether the restructuring would trigger Credit default swap (CDS) payments. European Central Bank and the International Monetary Fund negotiators avoided these triggers as they could have jeopardized the stability of major European banks who had been protection writers. An alternative could have been to create new CDS which clearly would pay in the event of debt restructuring. The market would have paid the spread between these and old (potentially more ambiguous) CDS. This practice is far more typical in jurisdictions that do not provide protective status to insolvent debtors similar to that provided by 1020: 213: 167: 5929:

of May 22, 2007, for the most widely traded LCDS form, which governs North American single name and index trades, the default settlement method for LCDS shifted to auction settlement rather than physical settlement. The auction method is essentially the same that has been used in the various ISDA cash settlement auction protocols, but does not require parties to take any additional steps following a credit event (i.e., adherence to a protocol) to elect cash settlement. On October 23, 2007, the first ever LCDS auction was held for

5789:'s annual report to shareholders in 2002, he said, "Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counterparties to them. In the meantime, though, before a contract is settled, the counterparties record profits and losses—often huge in amount—in their current earnings statements without so much as a penny changing hands. The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen)." 664: 705:, critics say you should not be able to buy a CDS—insurance against default—when you do not own the bond. Short selling is also viewed as gambling and the CDS market as a casino. Another concern is the size of the CDS market. Because naked credit default swaps are synthetic, there is no limit to how many can be sold. The gross amount of CDSs far exceeds all "real" corporate bonds and loans outstanding. As a result, the risk of default is magnified leading to concerns about systemic risk. 3121: 249:, although CDSs are not subject to regulations governing traditional insurance. Also, investors can buy and sell protection without owning debt of the reference entity. These "naked credit default swaps" allow traders to speculate on the creditworthiness of reference entities. CDSs can be used to create synthetic long and short positions in the reference entity. Naked CDS constitute most of the market in CDS. In addition, CDSs can also be used in capital structure 1272:(for example necessary if the original reference obligation was a loan that is repaid before the expiry of the contract), and for performing various calculation and administrative functions in connection with the transaction. By market convention, in contracts between CDS dealers and end-users, the dealer is generally the calculation agent, and in contracts between CDS dealers, the protection seller is generally the calculation agent. 5859:" of losses. For example, if company A fails, company B will default on its CDS contract to company C, possibly resulting in bankruptcy, and company C will potentially experience a large loss due to the failure to receive compensation for the bad debt it held from the reference company. Even worse, because CDS contracts are private, company C will not know that its fate is tied to company A; it is only doing business with company B. 506:& Clearing Corporation (DTCC), through its global repository Trade Information Warehouse (TIW), provides weekly data but publicly available information goes back only one year. The numbers provided by each source do not always match because each provider uses different sampling methods. Daily, intraday and real time data is available from S&P Capital IQ through their acquisition of Credit Market Analysis in 2012. 10886: 1217:, $ 2 billion (~$ 2.62 billion in 2023), were reported by the firm in May 2012 in relationship to these trades. The disclosure, which resulted in headlines in the media, did not disclose the exact nature of the trading involved, which remains in progress. The item traded, possibly related to CDX IG 9, an index based on the default risk of major U.S. corporations, has been described as a "derivative of a derivative". 22: 5852:, say 2%. If the condition of the reference company worsens, the risk premium rises, so company B can sell a CDS to company C with a premium of say, 5%, and pocket the 3% difference. However, if the reference company defaults, company B might not have the assets on hand to make good on the contract. It depends on its contract with company A to provide a large payout, which it then passes along to company C. 625:$ 10 million worth of protection for 1 year to AAA-Bank at this lower spread. Therefore, over the two years the hedge fund pays the bank 2 * 5% * $ 10 million = $ 1 million, but receives 1 * 2.5% * $ 10 million = $ 250,000, giving a total loss of $ 750,000. This loss is smaller than the $ 1 million loss that would have occurred if the second transaction had not been entered into. 30: 1426:

defaulted, and its senior bonds are now trading at 25 (i.e., 25 cents on the dollar) since the market believes that senior bondholders will receive 25% of the money they are owed once the company is wound up (all the defaulting company's liquidable assets are sold off). Therefore, the bank must pay the hedge fund $ 5 million × (100% − 25%) = $ 3.75 million.

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evidenced by the fact that Congress confirmed that certain derivatives, including CDS, do constitute gambling when, in 2000, to allay industry fears that they were illegal gambling, it exempted them from "any State or local law that prohibits or regulates gaming." While this decriminalized Naked CDS, it did not grant them relief under the federal gambling tax provisions.

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dealings because Berkshire require counterparties to make payments when contracts are initiated, so that Berkshire always holds the money. Berkshire Hathaway was a large owner of Moody's stock during the period that it was one of two primary rating agencies for subprime CDOs, a form of mortgage security derivative dependent on the use of credit default swaps.

5797:, the clearinghouse for the majority of trades in the US over-the-counter market, stated in October 2008 that once offsetting trades were considered, only an estimated $ 6 billion would change hands on October 21, during the settlement of the CDS contracts issued on Lehman Brothers' debt, which amounted to somewhere between $ 150 and $ 360 billion. 759:

may not want to sell or share the potential profits from the loan. By buying a credit default swap, the bank can lay off default risk while still keeping the loan in its portfolio. The downside to this hedge is that without default risk, a bank may have no motivation to actively monitor the loan and the counterparty has no relationship to the borrower.

287:. But investors can also buy CDS contracts referencing Risky Corp debt without actually owning any Risky Corp debt. This may be done for speculative purposes, to bet against the solvency of Risky Corp in a gamble to make money, or to hedge investments in other companies whose fortunes are expected to be similar to those of Risky Corp (see 1345: 5758:, because certain bondholders might benefit from the credit event of a GM bankruptcy due to their holding of CDSs. Critics speculate that these creditors had an incentive to push for the company to enter bankruptcy protection. Due to a lack of transparency, there was no way to identify the protection buyers and protection writers. 5893:

If a CDS is a notional principal contract, pre-default periodic and nonperiodic payments on the swap are deductible and included in ordinary income. If a payment is a termination payment, or a payment received on a sale of the swap to a third party, however, its tax treatment is an open question. In

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Despite Buffett's criticism on derivatives, in October 2008 Berkshire Hathaway revealed to regulators that it has entered into at least $ 4.85 billion in derivative transactions. Buffett stated in his 2008 letter to shareholders that Berkshire Hathaway has no counterparty risk in its derivative

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as the risk free rate. Both analyses make simplifying assumptions (such as the assumption that there is zero cost of unwinding the fixed leg of the swap on default), which may invalidate the no-arbitrage assumption. However the Duffie approach is frequently used by the market to determine theoretical

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Physical settlement: The protection seller pays the buyer par value, and in return takes delivery of a debt obligation of the reference entity. For example, a hedge fund has bought $ 5 million worth of protection from a bank on the senior debt of a company. In the event of a default, the bank

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to begin guaranteeing credit-default swaps. The SEC exemption represented the last regulatory approval needed by Atlanta-based Intercontinental. A derivatives analyst at Morgan Stanley, one of the backers for IntercontinentalExchange's subsidiary, ICE Trust in New York, launched in 2008, claimed that

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caused a total close to $ 400 billion to become payable to the buyers of CDS protection referenced against the insolvent bank. However the net amount that changed hands was around $ 7.2 billion. This difference is due to the process of 'netting'. Market participants co-operated so that CDS

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In the days and weeks leading up to Bear's collapse, the bank's CDS spread widened dramatically, indicating a surge of buyers taking out protection on the bank. It has been suggested that this widening was responsible for the perception that Bear Stearns was vulnerable, and therefore restricted its

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Credit default swaps are often used to manage the risk of default that arises from holding debt. A bank, for example, may hedge its risk that a borrower may default on a loan by entering into a CDS contract as the buyer of protection. If the loan goes into default, the proceeds from the CDS contract

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See Hearing to Review the Role of Credit Derivatives in the U.S. Economy, Before H. Comm. on Agriculture, at 4 (Nov. 20, 2008) (statement of Eric Dinallo, Superintendent of New York State Ins. Dept.) (declaring that "ith the proliferation of various kinds of derivatives in the late 20th Century came

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announced that it was studying the characterization of CDS in response to taxpayer confusion. As the outcome of its study, the IRS issued proposed regulations in 2011 specifically classifying CDS as notional principal contracts, and thereby qualifying such termination and sale payments for favorable

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for tax purposes,(Peaslee & Nirenberg 2008-07-21:129). but this is not certain. There is a risk of having CDS recharacterized as different types of financial instruments because they resemble put options and credit guarantees. In particular, the degree of risk depends on the type of settlement

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settled at a final price of 8.625%) and that these large payouts could lead to further bankruptcies of firms without enough cash to settle their contracts. However, industry estimates after the auction suggest that net cashflows were only in the region of $ 7 billion. because many parties held

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The definition of restructuring is quite technical but is essentially intended to respond to circumstances where a reference entity, as a result of the deterioration of its credit, negotiates changes in the terms in its debt with its creditors as an alternative to formal insolvency proceedings (i.e.

1369:; fiscal policy choices related to government revenues and expenses; and approaches used by nations to bail out troubled banking industries and private bondholders, assuming private debt burdens or socialising losses. The Credit default swap market also reveals the beginning of the sovereign crisis. 1318:

that limit the range of obligations that a protection buyer may deliver upon a credit event. Trading conventions for deliverable obligation characteristics vary for different markets and CDS contract types. Typical limitations include that deliverable debt be a bond or loan, that it have a maximum

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Explosive growth was not without operational headaches. On September 15, 2005, the New York Fed summoned 14 banks to its offices. Billions of dollars of CDS were traded daily but the record keeping was more than two weeks behind. This created severe risk management issues, as counterparties were in

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The high market share enjoyed by the banks was soon eroded as more and more asset managers and hedge funds saw trading opportunities in credit default swaps. By 2002, investors as speculators, rather than banks as hedgers, dominated the market. National banks in the USA used credit default swaps as

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For example, if a company has announced some bad news and its share price has dropped by 25%, but its CDS spread has remained unchanged, then an investor might expect the CDS spread to increase relative to the share price. Therefore, a basic strategy would be to go long on the CDS spread (by buying

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If Risky Corporation defaults on its debt three years into the CDS contract, the pension fund would stop paying the quarterly premium, and Derivative Bank would ensure that the pension fund is refunded for its loss of $ 10 million minus recovery (either by physical or cash settlement — see

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with a particular borrower or industry. The bank can lay off some of this risk by buying a CDS. Because the borrower—the reference entity—is not a party to a credit default swap, entering into a CDS allows the bank to achieve its diversity objectives without impacting its loan portfolio or customer

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Proponents of naked credit default swaps say that short selling in various forms, whether credit default swaps, options or futures, has the beneficial effect of increasing liquidity in the marketplace. That benefits hedging activities. Without speculators buying and selling naked CDSs, banks wanting

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If Risky Corp does indeed default after, say, one year, then the hedge fund will have paid $ 500,000 to AAA-Bank, but then receives $ 10 million (assuming zero recovery rate, and that AAA-Bank has the liquidity to cover the loss), thereby making a profit. AAA-Bank, and its investors, will incur

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Another kind of risk for the seller of credit default swaps is jump risk or jump-to-default risk ("JTD risk"). A seller of a CDS could be collecting monthly premiums with little expectation that the reference entity may default. A default creates a sudden obligation on the protection sellers to pay

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to default by the market, since a higher fee is being charged to protect against this happening. However, factors such as liquidity and estimated loss given default can affect the comparison. Credit spread rates and credit ratings of the underlying or reference obligations are considered among money

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During the rapid growth of the credit derivatives market the 1999 ISDA Credit Derivatives Definitions were introduced to standardize the legal documentation of CDS. Subsequently, replaced with the 2003 ISDA Credit Derivatives Definitions, and later the 2014 ISDA Credit Derivatives Definitions, each

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A new type of default swap is the "loan only" credit default swap (LCDS). This is conceptually very similar to a standard CDS, but unlike "vanilla" CDS, the underlying protection is sold on syndicated secured loans of the Reference Entity rather than the broader category of "Bond or Loan". Also, as

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as the CDS changes value over its life due to market conditions and due to the tendency for shorter dated CDS to sell at lower prices than longer dated CDS. One can try to account for the CDS as a hedge under FASB 133 but in practice that can prove very difficult unless the risky asset owned by the

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corporate bonds in 2005 and decided to hedge their exposure by buying CDS protection from Lehman Brothers. After Lehman's default, this protection was no longer active, and Washington Mutual's sudden default only days later would have led to a massive loss on the bonds, a loss that should have been

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To hedge the counterparty risk of entering a CDS transaction, one practice is to buy CDS protection on one's counterparty. The positions are marked-to-market daily and collateral pass from buyer to seller or vice versa to protect both parties against counterparty default, but money does not always

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Members of the Intercontinental clearinghouse ICE Trust (now ICE Clear Credit) in March 2009 would have to have a net worth of at least $ 5 billion (~$ 6.9 billion in 2023) and a credit rating of A or better to clear their credit-default swap trades. Intercontinental said in the statement

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The SEC's approval for ICE Futures' request to be exempted from rules that would prevent it clearing CDSs was the third government action granted to Intercontinental in one week. On March 3, its proposed acquisition of Clearing Corp., a Chicago clearinghouse owned by eight of the largest dealers in

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managing director Athanassios Diplas "the industry pushed through 10 years worth of changes in just a few months". By late 2008 processes had been introduced allowing CDSs that offset each other to be cancelled. Along with termination of contracts that have recently paid out such as those based on

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If both the borrower and lender are well-known and the market (or even worse, the news media) learns that the bank is selling the loan, then the sale may be viewed as signaling a lack of trust in the borrower, which could severely damage the banker-client relationship. In addition, the bank simply

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Finally, an investor might speculate on an entity's credit quality, since generally CDS spreads increase as credit-worthiness declines, and decline as credit-worthiness increases. The investor might therefore buy CDS protection on a company to speculate that it is about to default. Alternatively,

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Chief Investment Office (CIO), referred to as "the London whale" in reference to the huge positions he was taking. Heavy opposing bets to his positions are known to have been made by traders, including another branch of J.P. Morgan, who purchased the derivatives offered by J.P. Morgan in such high

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A clearinghouse acts as the buyer to every seller and seller to every buyer, reducing the risk of counterparty defaulting on a transaction. In the over-the-counter market, where credit- default swaps are currently traded, participants are exposed to each other in case of a default. A clearinghouse

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At first, banks were the dominant players in the market, as CDS were primarily used to hedge risk in connection with their lending activities. Banks also saw an opportunity to free up regulatory capital. By March 1998, the global market for CDS was estimated at $ 300 billion, with JP Morgan alone

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gets credit exposure to a portfolio of fixed income assets without owning those assets through the use of CDS. CDOs are viewed as complex and opaque financial instruments. An example of a synthetic CDO is Abacus 2007-AC1, which is the subject of the civil suit for fraud brought by the SEC against

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Transactions such as these do not even have to be entered into over the long-term. If Risky Corp's CDS spread had widened by just a couple of basis points over the course of one day, the hedge fund could have entered into an offsetting contract immediately and made a small profit over the life of

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Credit default swaps allow investors to speculate on changes in CDS spreads of single names or of market indices such as the North American CDX index or the European iTraxx index. An investor might believe that an entity's CDS spreads are too high or too low, relative to the entity's bond yields,

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The seller takes the risk that the buyer may default on the contract, depriving the seller of the expected revenue stream. More importantly, a seller normally limits its risk by buying offsetting protection from another party — that is, it hedges its exposure. If the original buyer drops out,

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Credit default swaps in their current form have existed since the early 1990s and increased in use in the early 2000s. By the end of 2007, the outstanding CDS amount was $ 62.2 trillion, falling to $ 26.3 trillion by mid-year 2010 and reportedly $ 25.5 trillion in early 2012. CDSs

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The thrust of this criticism is that Naked CDS are indistinguishable from gambling wagers, and thus give rise in all instances to ordinary income, including to hedge fund managers on their so-called carried interests, and that the IRS exceeded its authority with the proposed regulations. This is

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There are two competing theories usually advanced for the pricing of credit default swaps. The first, referred to herein as the 'probability model', takes the present value of a series of cashflows weighted by their probability of non-default. This method suggests that credit default swaps should

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Since default is a relatively rare occurrence (historically around 0.2% of investment grade companies default in any one year), in most CDS contracts the only payments are the premium payments from buyer to seller. Thus, although the above figures for outstanding notionals are very large, in the

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If Risky Corporation does not default on its bond payments, the pension fund makes quarterly payments to Derivative Bank for 5 years and receives its $ 10 million back after five years from Risky Corp. Though the protection payments totaling $ 1 million reduce investment returns for the

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The development and growth of the CDS market has meant that on many companies there is now a much larger outstanding notional of CDS contracts than the outstanding notional value of its debt obligations. (This is because many parties made CDS contracts for speculative purposes, without actually

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Cash settlement: The protection seller pays the buyer the difference between par value and the market price of a debt obligation of the reference entity. For example, a hedge fund has bought $ 5 million worth of protection from a bank on the senior debt of a company. This company has now

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Other proposals to clear credit-default swaps have been made by NYSE Euronext, Eurex AG and LCH.Clearnet Ltd. Only the NYSE effort is available now for clearing after starting on Dec. 22. As of Jan. 30, no swaps had been cleared by the NYSE’s London- based derivatives exchange, according to NYSE

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Clearing Corp. shareholders including JPMorgan Chase & Co., Goldman Sachs Group Inc. and UBS AG, received $ 39 million in cash from Intercontinental in the acquisition, as well as the Clearing Corp.’s cash on hand and a 50–50 profit-sharing agreement with Intercontinental on the revenue

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Data about the credit default swaps market is available from three main sources. Data on an annual and semiannual basis is available from the International Swaps and Derivatives Association (ISDA) since 2001 and from the Bank for International Settlements (BIS) since 2004. The Depository Trust

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A CDS is linked to a "reference entity" or "reference obligor", usually a corporation or government. The reference entity is not a party to the contract. The buyer makes regular premium payments to the seller, the premium amounts constituting the "spread" charged in basis points by the seller to

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is held following the publication of the initial midpoint of the dealer markets and what is the net open interest to deliver or be delivered actual bonds or loans. The final clearing point of this auction sets the final price for cash settlement of all CDS contracts and all physical settlement

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strategy that uses CDS transactions. This technique relies on the fact that a company's stock price and its CDS spread should exhibit negative correlation; i.e., if the outlook for a company improves then its share price should go up and its CDS spread should tighten, since it is less likely to

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Hedging risk is not limited to banks as lenders. Holders of corporate bonds, such as banks, pension funds or insurance companies, may buy a CDS as a hedge for similar reasons. Pension fund example: A pension fund owns five-year bonds issued by Risky Corp with par value of $ 10 million. To

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In the case of Lehman Brothers, it is claimed that the widening of the bank's CDS spread reduced confidence in the bank and ultimately gave it further problems that it was not able to overcome. However, proponents of the CDS market argue that this confuses cause and effect; CDS spreads simply

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The market size for Credit Default Swaps more than doubled in size each year from $ 3.7 trillion in 2003. By the end of 2007, the CDS market had a notional value of $ 62.2 trillion. But notional amount fell during 2008 as a result of dealer "portfolio compression" efforts (replacing

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A clearinghouse, and changes to the contracts to standardize them, will probably boost activity. ... Trading will be much easier.... We'll see new players come to the market because they’ll like the idea of this being a better and more traded product. We also feel like over time we'll see the

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By 2010, Intercontinental Exchange, through its subsidiaries, ICE Trust in New York, launched in 2008, and ICE Clear Europe Limited in London, UK, launched in July 2009, clearing entities for credit default swaps (CDS) had cleared more than $ 10 trillion in credit default swaps (CDS) (Terhune

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In 1997, JPMorgan developed a proprietary product called BISTRO (Broad Index Securitized Trust Offering) that used CDS to clean up a bank's balance sheet. The advantage of BISTRO was that it used securitization to split up the credit risk into little pieces that smaller investors found more

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For several months the SEC and our fellow regulators have worked closely with all of the firms wishing to establish central counterparties.... We believe that CME should be in a position soon to provide us with the information necessary to allow the commission to take action on its exemptive

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If the fund manager acts as the protection seller under a CDS, there is some risk of breach of insurance regulations for the manager.... There is no Netherlands Antilles case law or literature available which makes clear whether a CDS constitutes the 'conducting of insurance business' under

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The Bank for International Settlements estimates that outstanding derivatives total $ 708 trillion. U.S. and European regulators are developing separate plans to stabilize the derivatives market. Additionally there are some globally agreed standards falling into place in March 2009,

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to hedge might not find a ready seller of protection. Speculators also create a more competitive marketplace, keeping prices down for hedgers. A robust market in credit default swaps can also serve as a barometer to regulators and investors about the credit health of a company or country.

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In Europe, CDS Index clearing was launched by IntercontinentalExchange's European subsidiary ICE Clear Europe on July 31, 2009. It launched Single Name clearing in Dec 2009. By the end of 2009, it had cleared CDS contracts worth EUR 885 billion reducing the open interest down to EUR

610:$ 10 million worth of protection for 1 year to AAA-Bank at this higher rate. Therefore, over the two years the hedge fund pays the bank 2 * 5% * $ 10 million = $ 1 million, but receives 1 * 15% * $ 10 million = $ 1.5 million, giving a total profit of $ 500,000. 244:

An investor or speculator may "buy protection" to hedge the risk of default on a bond or other debt instrument, regardless of whether such investor or speculator holds an interest in or bears any risk of loss relating to such bond or debt instrument. In this way, a CDS is similar to

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Critics of the huge credit default swap market have claimed that it has been allowed to become too large without proper regulation and that, because all contracts are privately negotiated, the market has no transparency. Furthermore, there have been claims that CDSs exacerbated the

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Because LCDS trades are linked to secured obligations with much higher recovery values than the unsecured bond obligations that are typically assumed the cheapest to deliver in respect of vanilla CDS, LCDS spreads are generally much tighter than CDS trades on the same name.

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premium payments. So CDS pricing models have to take into account the possibility of a default occurring some time between the effective date and maturity date of the CDS contract. For the purpose of explanation we can imagine the case of a one-year CDS with effective date

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capital gains tax treatment. These proposed regulations, which are yet to be finalized, have already been subject to criticism at a public hearing held by the IRS in January 2012, as well as in the academic press, insofar as that classification would apply to Naked CDS.

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Insurance requires the buyer to disclose all known risks, while CDSs do not (the CDS seller can in many cases still determine potential risk, as the debt instrument being "insured" is a market commodity available for inspection, but in the case of certain instruments like

698:, estimated to be up to 80% of the credit default swap market. There is currently a debate in the United States and Europe about whether speculative uses of credit default swaps should be banned. Legislation is under consideration by Congress as part of financial reform. 572:. Shorting a bond faced difficult practical problems, such that shorting was often not feasible; CDS made shorting credit possible and popular. Because the speculator in either case does not own the bond, its position is said to be a synthetic long or short position. 9801: 851:

CDS protection) while simultaneously hedging oneself by buying the underlying stock. This technique would benefit in the event of the CDS spread widening relative to the equity price, but would lose money if the company's CDS spread tightened relative to its equity.

1284:. Typical CDS contracts do not provide an internal mechanism for challenging the occurrence or non-occurrence of a credit event and rather leave the matter to the courts if necessary, though actual instances of specific events being disputed are relatively rare. 1093:(DTCC), which runs a warehouse for CDS trade confirmations accounting for around 90% of the total market, announced that it will release market data on the outstanding notional of CDS trades on a weekly basis. The data can be accessed on the DTCC's website here: 6796:

Netherlands Antilles law. However, if certain requirements are met, credit derivatives do not qualify as an agreement of (non-life) insurance because such an arrangement would in those circumstances not contain all the elements necessary to qualify it as such.

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early as 1996. In that year, the Office of the Comptroller of the Currency measured the size of the market as tens of billions of dollars. Six years later, by year-end 2002, the outstanding amount was over $ 2 trillion (~$ 3.24 trillion in 2023).

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Another common arbitrage strategy aims to exploit the fact that the swap-adjusted spread of a CDS should trade closely with that of the underlying cash bond issued by the reference entity. Misalignment in spreads may occur due to technical reasons such as:

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However, if Risky Corp does not default, then the CDS contract runs for two years, and the hedge fund ends up paying $ 1 million, without any return, thereby making a loss. AAA-Bank, by selling protection, has made $ 1 million without any upfront

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basis. In contrast, assets that are held for investment, such as a commercial loan or bonds, are reported at cost, unless a probable and significant loss is expected. Thus, hedging a commercial loan using a CDS can induce considerable volatility into the

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where he and his team created bundles of swaps and sold them to investors. The investors would get the streams of revenue, according to the risk-and-reward level they chose; the bank would get insurance against its loans, and fees for setting up the deal.

241:. CDS contracts on sovereign obligations also usually include as credit events repudiation, moratorium, and acceleration. Most CDSs are in the $ 10–$ 20 million range with maturities between one and 10 years. Five years is the most typical maturity. 5761:

It was also feared at the time of Lehman's bankruptcy that the $ 400 billion notional of CDS protection which had been written on the bank could lead to a net payout of $ 366 billion from protection sellers to buyers (given the cash-settlement

57:. That is, the seller of the CDS insures the buyer against some reference asset defaulting. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, may expect to receive a payoff if the asset defaults. 382:

The seller is not required to maintain reserves to cover the protection sold (this was a principal cause of AIG's financial distress in 2008; it had insufficient reserves to meet the "run" of expected payouts caused by the collapse of the housing

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the seller squares its position by either unwinding the hedge transaction or by selling a new CDS to a third party. Depending on market conditions, that may be at a lower price than the original CDS and may therefore involve a loss to the seller.

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1. The introduction of central clearing houses, one for the US and one for Europe. A clearing house acts as the central counterparty to both sides of a CDS transaction, thereby reducing the counterparty risk that both buyer and seller face.

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legal uncertainty as to whether certain derivatives, including credit default swaps, violated state bucket shop and gambling laws. created a ‘safe harbor’ by . . . preempting state and local gaming and bucket shop laws . . .") available at

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A bank buying protection can also use a CDS to free regulatory capital. By offloading a particular credit risk, a bank is not required to hold as much capital in reserve against the risk of default (traditionally 8% of the total loan under

1422:

pays the hedge fund $ 5 million cash, and the hedge fund must deliver $ 5 million face value of senior debt of the company (typically bonds or loans, which are typically worth very little given that the company is in default).

579:

believes that Risky Corp will soon default on its debt. Therefore, it buys $ 10 million worth of CDS protection for two years from AAA-Bank, with Risky Corp as the reference entity, at a spread of 500 basis points (=5%) per annum.

712:

called for an outright ban on naked credit default swaps, viewing them as "toxic" and allowing speculators to bet against and "bear raid" companies or countries. His concerns were echoed by several European politicians who, during the

936:

Despite early successes, credit default swaps could not be profitable until an industrialized and streamlined process was created to issue them. This changed when CDS's began to be traded as securities from JPMorgan, an effort led by

1348:

Sovereign credit default swap prices of selected European countries (2010-2011). The left axis is basis points, or 100ths of a percent; a level of 1,000 means it costs $ 1 million per year to protect $ 10 million of debt for five

1166:

the credit-default swap market, was approved by the Federal Trade Commission and the Justice Department. On March 5, 2009, the Federal Reserve Board, which oversees the clearinghouse, granted a request for ICE to begin clearing.

5880:

The U.S federal income tax treatment of CDS is uncertain (Nirenberg and Kopp 1997:1, Peaslee & Nirenberg 2008-07-21:129 and Brandes 2008). Commentators have suggested that, depending on how they are drafted, they are either

5866:, the establishment of a central exchange or clearing house for CDS trades would help to solve the "domino effect" problem, since it would mean that all trades faced a central counterparty guaranteed by a consortium of dealers. 5751:

reflected the reality that the company was in serious trouble. Furthermore, they claim that the CDS market allowed investors who had counterparty risk with Lehman Brothers to reduce their exposure in the case of their default.

5808:

insurance companies got involved with writing credit default swaps on mortgage-backed CDOs. Some media reports have claimed this was a contributing factor to the downfall of some of the monolines. In 2009 one of the monolines,

1064:

sellers were allowed to deduct from their payouts the inbound funds due to them from their hedging positions. Dealers generally attempt to remain risk-neutral, so that their losses and gains after big events offset each other.

3115:

is made, shown in blue. At either side of the diagram are the cashflows up to that point in time with premium payments in blue and default payments in red. If the contract is terminated the square is shown with solid shading.

4155: 891:

and should theoretically be close to zero. Basis trades attempt to exploit this difference to make a profit, however hedging a bond with a CDS does have irreducible risks which should be considered when making basis trades.

724:

Chairman Gensler are not in favor of an outright ban on naked credit default swaps. They prefer greater transparency and better capitalization requirements. These officials think that naked CDSs have a place in the market.

5845:

insured by the CDS. There was also fear that Lehman Brothers and AIG's inability to pay out on CDS contracts would lead to the unraveling of complex interlinked chain of CDS transactions between financial institutions.

152:

Some claim that derivatives such as CDS are potentially dangerous in that they combine priority in bankruptcy with a lack of transparency. A CDS can be unsecured (without collateral) and be at higher risk for a default.

1014:

Composition of the United States 15.5 trillion US dollar CDS market at the end of 2008 Q2. Green tints show Prime asset CDSs, reddish tints show sub-prime asset CDSs. Numbers followed by "Y" indicate years until

64:

of the loan), and the seller of the CDS takes possession of the defaulted loan or its market value in cash. However, anyone can purchase a CDS, even buyers who do not hold the loan instrument and who have no direct

842:

arbitrage because they exploit market inefficiencies between different parts of the same company's capital structure; i.e., mis-pricings between a company's debt and equity. An arbitrageur attempts to exploit the

1136:

Speaking before the changes went live, Sivan Mahadevan, a derivatives analyst at Morgan Stanley, one of the backers for IntercontinentalExchange's subsidiary, ICE Trust in New York, launched in 2008, claimed that

3941: 989:

Although speculators fueled the exponential growth, other factors also played a part. An extended market could not emerge until 1999, when ISDA standardized the documentation for credit default swaps. Also, the

275:

As an example, imagine that an investor buys a CDS from AAA-Bank, where the reference entity is Risky Corp. The investor—the buyer of protection—will make regular payments to AAA-Bank—the seller of protection.

7892:"Remarks by Chairman Alan Greenspan Risk Transfer and Financial Stability To the Federal Reserve Bank of Chicago's Forty-first Annual Conference on Bank Structure, Chicago, Illinois (via satellite) May 5, 2005" 6028:

Intercontinental Exchange's closest rival as credit default swaps (CDS) clearing houses, CME Group (CME) cleared $ 192 million in comparison to ICE's $ 10 trillion (Terhune Bloomberg Business Week 2010-07-29).

1275:

It is not the responsibility of the calculation agent to determine whether or not a credit event has occurred but rather a matter of fact that, pursuant to the terms of typical contracts, must be supported by

593:

Note that there is a third possibility in the above scenario; the hedge fund could decide to liquidate its position after a certain period of time in an attempt to realise its gains or losses. For example:

7661: 3724: 795:(200 basis points = 2.00 percent). In return for this credit protection, the pension fund pays 2% of $ 10 million ($ 200,000) per annum in quarterly installments of $ 50,000 to Derivative Bank. 8219:"Testimony Concerning Turmoil in U.S. Credit Markets: Recent Actions Regarding Government Sponsored Entities, Investment Banks and Other Financial Institutions (Christopher Cox, September 23, 2008)" 568:

Credit default swaps opened up important new avenues to speculators. Investors could go long on a bond without any upfront cost of buying a bond; all the investor need do was promise to pay in the

3022:

To price the CDS we now need to assign probabilities to the five possible outcomes, then calculate the present value of the payoff for each outcome. The present value of the CDS is then simply the

812:

In addition to financial institutions, large suppliers can use a credit default swap on a public bond issue or a basket of similar risks as a proxy for its own credit risk exposure on receivables.

736:

found that naked CDS did not worsen the Greek credit crisis. Without credit default swaps, Greece's borrowing costs would be higher. As of November 2011, the Greek bonds have a bond yield of 28%.

6745:

like insurance insofar as the buyer collects when an underlying security defaults ... unlike insurance, however, in that the buyer need not have an "insurable interest" in the underlying security

5890:(physical/cash and binary/FMV) and trigger (default only/any credit event) (Nirenberg & Kopp 1997:8). And, as noted below, the appropriate treatment for Naked CDS may be entirely different. 1326:

The premium payments are generally quarterly, with maturity dates (and likewise premium payment dates) falling on March 20, June 20, September 20, and December 20. Due to the proximity to the

8354: 462:"), the buyer loses its protection against default by the reference entity. If AAA-Bank defaults but Risky Corp. does not, the buyer might need to replace the defaulted CDS at a higher cost. 333:, or 0.5% (1 basis point = 0.01%), then an investor buying $ 10 million worth of protection from AAA-Bank must pay the bank $ 50,000. Payments are usually made on a quarterly basis, in 8749: 1146:

In the U.S., central clearing operations began in March 2009, operated by InterContinental Exchange (ICE). A key competitor also interested in entering the CDS clearing sector is CME Group.

9604: 7000:"The Trade Information Warehouse (Warehouse) is the market's first and only centralized global repository for trade reporting and post-trade processing of OTC credit derivatives contracts" 4637: 1117:

The early months of 2009 saw several fundamental changes to the way CDSs operate, resulting from concerns over the instruments' safety after the events of the previous year. According to

701:

Critics assert that naked CDSs should be banned, comparing them to buying fire insurance on your neighbor's house, which creates a huge incentive for arson. Analogizing to the concept of

6596: 4480: 3530: 4059: 755:. However, these options may not meet the bank's needs. Consent of the corporate borrower is often required. The bank may not want to incur the time and cost to find loan participants. 6977: 5906:

The accounting treatment of CDS used for hedging may not parallel the economic effects and instead, increase volatility. For example, GAAP generally require that CDS be reported on a

5075: 946:

digestible, since most investors lacked EBRD's capability to accept $ 4.8 billion in credit risk all at once. BISTRO was the first example of what later became known as synthetic

9260: 7117: 3832: 5829:, counterparties became subject to a risk of default, amplified with the involvement of Lehman Brothers and AIG in a very large number of CDS transactions. This is an example of 4904: 4235: 3988: 3771: 3577: 3418: 1443:) may be held to facilitate settlement of a large number of contracts at once, at a fixed cash settlement price. During the auction process participating dealers (e.g., the big 7591:. Amherst, MA: Center for International Securities and Derivatives Markets, Isenberg School of Management, University of Massachusetts, Amherst, 2004. Retrieved March 17, 2009. 5778:; that CDS contracts have been acting to distribute risk just as was intended; and that it is not CDSs themselves that need further regulation but the parties who trade them. 5681: 3628: 6857: 4756: 6827: 1192:

today that all market participants such as hedge funds, banks or other institutions are open to become members of the clearinghouse as long as they meet these requirements.

9486: 8290: 5085: 1105:

the "clearinghouse, and changes to the contracts to standardize them, will probably boost activity". IntercontinentalExchange's subsidiary, ICE Trust's larger competitor,

9644: 3302: 3275: 4401: 808:). The pension fund still loses the $ 600,000 it has paid over three years, but without the CDS contract it would have lost the entire $ 10 million minus recovery. 3453: 1153:

By the end of 2009, banks had reclaimed much of their market share; hedge funds had largely retreated from the market after the crises. According to an estimate by the

9784: 7551: 7539:

the use of an exotic credit default swap (called a Net Lease CDS), which effectively hedges tenant credit risk but at a substantially higher price than a vanilla swap.

1456:(ISDA), who organised them, auctions have recently proved an effective way of settling the very large volume of outstanding CDS contracts written on companies such as 1447:) submit prices at which they would buy and sell the reference entity's debt obligations, as well as net requests for physical settlement against par. A second stage 313:

AAA-Bank pays the investor the difference between the par value and the market price of a specified debt obligation (even if Risky Corp defaults there is usually some

3244: 3157: 357:

CDS contracts have obvious similarities with insurance contracts because the buyer pays a premium and, in return, receives a sum of money if an adverse event occurs.

9779: 7694: 5486: 3062: 5247: 4568: 4348: 4321: 4294: 4267: 3863: 3659: 3484: 3349: 3211: 3184: 2938: 2911: 2884: 2857: 2830: 739:

A bill in the U.S. Congress proposed giving a public authority the power to limit the use of CDSs other than for hedging purposes, but the bill did not become law.

4509: 3113: 3009: 1028:

absence of default the net cash flows are only a small fraction of this total: for a 100 bp = 1% spread, the annual cash flows are only 1% of the notional amount.

509:

According to DTCC, the Trade Information Warehouse maintains the only "global electronic database for virtually all CDS contracts outstanding in the marketplace."

5771:

frequently. This would have led to margin calls from buyers to sellers as Lehman's CDS spread widened, reducing the net cashflows on the days after the auction.

4177: 3371: 9663: 957:, regulators initially found CDS's ability to disperse default risk attractive. In 2000, credit default swaps became largely exempt from regulation by both the 325:

The "spread" of a CDS is the annual amount the protection buyer must pay the protection seller over the length of the contract, expressed as a percentage of the

6720:"Testimony Concerning Turmoil in U.S. Credit Markets: Recent Actions Regarding Government Sponsored Entities, Investment Banks and Other Financial Institutions" 4533: 4372: 3082: 2978: 2958: 10723: 368:. By contrast, a CDS provides an equal payout to all holders, calculated using an agreed, market-wide method. The holder does not need to own the underlying 3029:

This is illustrated in the following tree diagram where at each payment date either the contract has a default event, in which case it ends with a payment of

237:

A default is often referred to as a "credit event" and includes such events as failure to pay, restructuring and bankruptcy, or even a drop in the borrower's

775:

relations. Similarly, a bank selling a CDS can diversify its portfolio by gaining exposure to an industry in which the selling bank has no customer base.

1023:

Proportion of CDSs nominals (lower left) held by United States banks compared to all derivatives, in 2008Q2. The black disc represents the 2008 public debt.

10635: 9748: 9934: 7359: 33:

If the reference bond defaults, the protection seller pays par value of the bond to the buyer, and the buyer transfers ownership of the bond to the seller

9057: 5833:, risk which threatens an entire market, and a number of commentators have argued that size and deregulation of the CDS market have increased this risk. 1468:, however, has questioned in advance ISDA's ability to structure an auction, as defined to date, to set compensation associated with a 2012 bond swap in 917:

are widely credited with creating the modern credit default swap in 1994. In that instance, J.P. Morgan had extended a $ 4.8 billion credit line to

9417:

Diane Freda, I.R.S. Proposed Rules Mistakenly Classify Section 1256 Contracts, I.R.S. Witnesses Say, DAILY TAX REP. (BNA) No. 12 at G-4 (Jan. 20, 2012).

694:

In the examples above, the hedge fund did not own any debt of Risky Corp. A CDS in which the buyer does not own the underlying debt is referred to as a

9301:

Nirenberg, David Z.; Steven L. Kopp. (August 1997). "Credit Derivatives: Tax Treatment of Total Return Swaps, Default Swaps, and Credit-Linked Notes".

4070: 474:, such as ICE TCC, there will no longer be "counterparty risk", as the risk of the counterparty will be held with the central exchange/clearing house. 8463: 1036:

The market for Credit Default Swaps attracted considerable concern from regulators after a number of large scale incidents in 2008, starting with the

8953: 8754: 1291:

that will give rise to payment obligations by the protection seller and delivery obligations by the protection buyer. Typical credit events include

557:

the investor might sell protection if it thinks that the company's creditworthiness might improve. The investor selling the CDS is viewed as being "

8709: 8365: 6770:

If a default occurs, the party providing the credit protection — the seller — must make the buyer whole on the amount of insurance bought.

6522: 1056:

of Bear's collapse; i.e., investors saw that Bear was in trouble, and sought to hedge any naked exposure to the bank, or speculate on its collapse.

751:

There are other ways to eliminate or reduce the risk of default. The bank could sell (that is, assign) the loan outright or bring in other banks as

9945: 9894: 8322: 7914: 7477: 6889: 6337: 6113: 1469: 858:(LBO). Frequently this leads to the company's CDS spread widening due to the extra debt that will soon be put on the company's books, but also an 9775: 8854: 6396: 481:. If one or both parties to a CDS contract must post collateral (which is common), there can be margin calls requiring the posting of additional 340:

All things being equal, at any given time, if the maturity of two credit default swaps is the same, then the CDS associated with a company with a

9658: 9189: 6120: 1453: 1230: 1133:

2. The international standardization of CDS contracts, to prevent legal disputes in ambiguous cases where what the payout should be is unclear.

930: 115: 9029: 8661: 8402: 8164: 7181: 493:

of one of the parties changes. Many CDS contracts even require payment of an upfront fee (composed of "reset to par" and an "initial coupon.").

8532: 7216:

The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Our Pensions, and Prosperity, and What We Can Do About It

6608: 126:), as well as loan-only credit default swaps (LCDS). Further, in addition to corporations and governments, the reference entity can include a 9862: 9823: 8080: 6783: 5848:

Chains of CDS transactions can arise from a practice known as "netting". Here, company B may buy a CDS from company A with a certain annual

9203: 10429: 10004: 3869: 1339: 9264: 8040: 7124: 5693:

In the "no-arbitrage" model proposed by both Duffie, and Hull-White, it is assumed that there is no risk free arbitrage. Duffie uses the

1204:

In April 2012, hedge fund insiders became aware that the market in credit default swaps was possibly being affected by the activities of

994:

spurred a market for CDS in emerging market sovereign debt. In addition, in 2004, index trading began on a large scale and grew rapidly.

966: 9817: 3011:. If we assume for simplicity that defaults can only occur on one of the payment dates then there are five ways the contract could end: 10434: 9112: 7582: 6999: 6058: 5794: 3015:

either it does not have any default at all, so the four premium payments are made and the contract survives until the maturity date, or

1090: 360:

However, there are also many differences, the most important being that an insurance contract provides an indemnity against the losses

95: 5817:, claiming that Merrill had misrepresented some of its CDOs to MBIA in order to persuade MBIA to write CDS protection for those CDOs. 7508: 513: 9855: 9654: 9440: 8807: 6951: 5755: 4538:

To get the total present value of the credit default swap we multiply the probability of each outcome by its present value to give

998:

offsetting redundant contracts), and by the end of 2008 notional amount outstanding had fallen 38 percent to $ 38.6 trillion.

431: 8636: 6864: 933:

in order to cut the reserves that J.P. Morgan was required to hold against Exxon's default, thus improving its own balance sheet.

10769: 8558: 8294: 7951: 6168: 958: 854:

An interesting situation in which the inverse correlation between a company's stock price and CDS spread breaks down is during a

8355:"The Derivatives Dealers' Club and Derivatives Markets Reform: A Guide for Policy Makers, Citizens and Other Interested Parties" 7847: 7118:"The Derivatives Dealers' Club and Derivatives Markets Reform: A Guide for Policy Makers, Citizens and Other Interested Parties" 10459: 8938: 8513: 5946:

definition update seeks to ensure the CDS payoffs closely mimic the economics of the underlying reference obligations (bonds).

3665: 441:

To cancel the insurance contract, the buyer can typically stop paying premiums, while for CDS the contract needs to be unwound.

9969: 8978: 10926: 7748: 7442: 7224: 7063: 5960: 1372:

Since December 1, 2011 the European Parliament has banned naked Credit default swap (CDS) on the debt for sovereign nations.

280:

Risky Corp defaults on its debt, the investor receives a one-time payment from AAA-Bank, and the CDS contract is terminated.

7558: 6672: 497:

millions, if not billions, of dollars to protection buyers. This risk is not present in other over-the-counter derivatives.

372:

and does not even have to suffer a loss from the default event. The CDS can therefore be used to speculate on debt objects.

9702: 9461: 8727: 7669: 7079: 6858:"Keynote Address of Chairman Gary Gensler, OTC Derivatives Reform, Markit's Outlook for OTC Derivatives Markets Conference" 962: 721: 435: 9645:

Barroso considers ban on speculation with banning purely speculative naked sales on credit default swaps of sovereign debt

5726:

change in its swap premium. CS01 may also be defined as the change in value for a one basis point parallel shift in the

4535:. The riskier the reference entity the greater the spread and the more rapidly the survival probability decays with time. 2767:

Under the probability model, a credit default swap is priced using a model that takes four inputs; this is similar to the

787:

manage the risk of losing money if Risky Corp defaults on its debt, the pension fund buys a CDS from Derivative Bank in a

264:. The buyer makes periodic payments to the seller, and in return receives a payoff if an underlying financial instrument 10591: 9285: 8387: 8268: 6365: 5730:. "CS01 Risk", in turn, refers to any unfavorable change in value, in response to changes in underlying credit spreads. 5722:- the credit spread dollar value of one basis point - reflects the change in market value of a CDS in response to a one 272:. The CDS may refer to a specified loan or bond obligation of a "reference entity", usually a corporation or government. 25:

If the reference bond performs without default, the protection buyer pays quarterly payments to the seller until maturity

7601:

Freeman, Jake; Kapoor, Vivek (June 17, 2019). "Irreducible Risks of Hedging a Bond with a Default Swap". Rochester, NY.

7155: 6423: 6151: 1109:, hasn't received an SEC exemption, and agency spokesman John Nester said he didn't know when a decision would be made. 9673: 8490: 7332: 1439:

When a credit event occurs on a major company on which a lot of CDS contracts are written, an auction (also known as a

835:

default on its debt. However, if its outlook worsens then its CDS spread should widen and its stock price should fall.

7829: 7025: 102:) announced it would give regulators greater access to its credit default swaps database. There is "$ 8 trillion 10327: 9630: 8832: 7801: 6706: 973:, specifically stated that CDSs are neither futures nor securities and so are outside the remit of the SEC and CFTC. 406:. Dealers in CDSs manage risk primarily by means of hedging with other CDS deals and in the underlying bond markets; 9764: 9004: 8780: 8609: 5754:

Credit default swaps have also faced criticism that they contributed to a breakdown in negotiations during the 2009

1357:; easy credit conditions during the 2002–2008 period that encouraged high-risk lending and borrowing practices; the 905:

Forms of credit default swaps had been in existence from at least the early 1990s, with early trades carried out by

561:" on the CDS and the credit, as if the investor owned the bond. In contrast, the investor who bought protection is " 86:

are not traded on an exchange and there is no required reporting of transactions to a government agency. During the

10829: 9997: 9679: 9429:

James Blakey, Tax Naked Credit Default Swaps for What They Are: Legalized Gambling, 8 U. Mass. L. Rev. 136 (2013).

7307: 6434: 1330:, which fall on the third Wednesday of these months, these CDS maturity dates are also referred to as "IMM dates". 1214: 6808: 6559: 4574: 470:

In the future, in the event that regulatory reforms require that CDS be traded and settled via a central exchange/

7935:

The lack of standardized documentation for credit swaps, in fact, could become a major brake on market expansion.

5920:

bank or corporation is exactly the same as the Reference Obligation used for the particular CDS that was bought.

4409: 3490: 1010: 349:

managers to be the best indicators of the likelihood of sellers of CDSs having to perform under these contracts.

7509:"Using Letters Of Credit, Credit Default Swaps And Other Forms of Credit Enhancements in Net Lease Transactions" 3994: 10764: 10409: 9938: 8867: 8584: 8081:"The level of outstanding credit-derivative trade confirmations presents operational and legal risks for firms" 7370: 5988: 5826: 5775: 5740: 4914: 1358: 1319:

maturity of 30 years, that it not be subordinated, that it not be subject to transfer restrictions (other than

947: 816: 634: 388: 234:

of the bond in exchange for physical delivery of the bond, although settlement may also be by cash or auction.

87: 9061: 8388:"IntercontinentalExchange gets SEC exemption: The exchange will begin clearing credit-default swaps next week" 8241: 8193: 7891: 783:). This frees resources the bank can use to make other loans to the same key customer or to other borrowers. 6903: 3120: 3026:

of the five payoffs multiplied by their probability of occurring. For a simplified numeric example, see and

1389: 1060: 767: 9549: 7987: 1452:

requests as well as matched limit offers resulting from the auction are actually settled. According to the

585:

a $ 9.5 million loss minus recovery unless the bank has somehow offset the position before the default.

458:

The buyer takes the risk that the seller may default. If AAA-Bank and Risky Corp. default simultaneously ("

192:. If the associated credit instrument suffers no credit event, then the buyer continues paying premiums at t 9130: 8467: 7735:

Fool's Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe

7279: 6114:"Chart; ISDA Market Survey; Notional amounts outstanding at year-end, all surveyed contracts, 1987–present" 5744: 3777: 3084:

is the recovery rate, or it survives without a default being triggered, in which case a premium payment of

1381: 950:(CDOs). There were two Bistros in 1997 for approximately $ 10 billion (~$ 17.6 billion in 2023) each. 714: 489:

amount may vary over the life of the CDS contract, if the market price of the CDS contract changes, or the

4766: 4183: 1303:

corporate reference entities, European corporate reference entities and sovereigns generally also include

230:

insure against a credit event. If the reference entity defaults, the protection seller pays the buyer the

10804: 10342: 10196: 9990: 8713: 5882: 3947: 3730: 3536: 3377: 1323:), that it be of a standard currency and that it not be subject to some contingency before becoming due. 1122:

Lehmans, this had by March reduced the face value of the market down to an estimated $ 30 trillion.

1075: 991: 9953: 9912: 9883: 9177: 8326: 7922: 7485: 6722:. Senate Committee on Banking, Housing, and Urban Affairs. September 23, 2008. Retrieved March 17, 2009. 6634: 6124: 283:

If the investor actually owns Risky Corp's debt (i.e., is owed money by Risky Corp), a CDS can act as a

10660: 10601: 10423: 9844: 9034: 8411: 8169: 7190: 6400: 6081: 5955: 1083: 222:, then the seller pays the buyer for the loss, and the buyer would cease paying premiums to the seller. 9769: 9649: 9524: 9499: 8610:"Crony Capitalism: After Lobbying Against New Financial Regulations, JPMorgan Loses $ 2B in Risky Bet" 8142: 6317:"Testimony Concerning Credit Default Swaps Before the House Committee on Agriculture October 15, 2008" 5793:

change hands due to the offset of gains and losses by those who had both bought and sold protection.

5496: 3583: 646:

in April 2010. Abacus is a synthetic CDO consisting of credit default swaps referencing a variety of

10705: 10516: 9685: 8665: 7866: 7662:"The Promise of Credit Derivatives in Nonfinancial Corporations (and Why It's Failed to Materialize)" 6576:

ISDA is the trade group that represents participants in the privately negotiated derivatives industry

6009: 5970: 5205:{\displaystyle -p_{1}p_{2}p_{3}p_{4}(\delta _{1}+\delta _{2}+\delta _{3}+\delta _{4}){\frac {Nc}{4}}} 4647: 1990: 1976: 1101: 929:. A team of J.P. Morgan bankers led by Masters then sold the credit risk from the credit line to the 819:, most observers conclude that using credit default swaps as a hedging device has a useful purpose. 138: 9733: 9711: 9349: 7643: 1126:

administered by International Swaps and Derivatives Association (ISDA). Two of the key changes are:

10916: 10824: 10819: 9740: 9612: 9608: 9592: 6374: 5895: 5785:

famously described derivatives bought speculatively as "financial weapons of mass destruction." In

2752: 1582: 1086:(OTC). This led to recent calls for the market to open up in terms of transparency and regulation. 1079: 1037: 1019: 647: 516:

publishes quarterly credit derivative data about insured U.S commercial banks and trust companies.

471: 9818:

New ways to dice up debt - Suddenly, credit derivatives-deals that spread credit risk--are surging

8091: 7443:"OCC 96-43; OCC Bulletin; Subject: Credit Derivatives; Description: Guidelines for National Banks" 1476:

for Greek bondholders, issued an opinion that the bond swap would not constitute a default event.

1396:'s restructuring in 2000 led to the credit event's removal from North American high yield trades. 90:, the lack of transparency in this large market became a concern to regulators as it could pose a 10774: 10474: 10444: 10419: 10302: 10143: 10075: 9976: 9210: 8014: 7253: 3280: 3253: 1609: 1595: 1353:

The European sovereign debt crisis resulted from a combination of complex factors, including the

954: 763: 391:

made up of "slices" of debt packages, it can be difficult to tell exactly what is being insured);

127: 60:

In the event of default, the buyer of the credit default swap receives compensation (usually the

6315:

Sirri, Erik, Director, Division of Trading and Markets U.S. Securities and Exchange Commission.

6201:

Kiff, John; Jennifer Elliott; Elias Kazarian; Jodi Scarlata; Carolyne Spackman (November 2009).

5774:

Senior bankers have argued that not only did the CDS market function remarkably well during the

4377: 10921: 10571: 10556: 10521: 10464: 9788: 9744: 9706: 8055: 6758: 5981: 5870: 3424: 2756: 926: 9372: 8116: 7622: 7214: 6488: 1409:

As described in an earlier section, if a credit event occurs then CDS contracts can either be

1237:, a corporation or sovereign that generally, although not always, has debt outstanding, and a 69:

in the loan (these are called "naked" CDSs). If there are more CDS contracts outstanding than

10784: 10551: 10449: 10128: 9923: 9752: 9720: 9600: 9336: 8895: 8361: 7740: 7630: 6553: 6551: 6382: 5975: 5965: 3216: 3129: 131: 118:, although there are many variants. In addition to the basic, single-name swaps, there are 9770:

Warren Buffett on Derivatives - Excerpts from the Berkshire Hathaway annual report for 2002.

8907: 8687: 6461: 5253: 3032: 379:

The seller might in principle not be a regulated entity (though in practice most are banks);

10911: 10738: 10695: 10685: 10675: 10670: 10396: 10337: 10272: 10226: 10221: 10095: 10055: 10022: 8850: 5225: 4546: 4512: 4326: 4299: 4272: 4245: 3841: 3637: 3462: 3327: 3189: 3162: 2916: 2889: 2862: 2835: 2808: 2801: 1299:

with respect to its direct or guaranteed bond or loan debt. CDS written on North American

1209: 910: 482: 421: 399: 146: 9905: 7523: 7417: 6548: 6316: 6202: 4485: 3087: 2983: 212: 8: 10743: 10454: 10277: 9876: 8218: 6809:"Understanding Derivatives: Markets and Infrastructure - Federal Reserve Bank of Chicago" 6719: 5781:

Some general criticism of financial derivatives is also relevant to credit derivatives.

5727: 4351: 4161: 3355: 1569: 1516: 1502: 485:. The required collateral is agreed on by the parties when the CDS is first issued. This 337:. These payments continue until either the CDS contract expires or Risky Corp defaults. 145:

of any entity on which a CDS is available, which can be compared to that provided by the

9759:

Hull, J. C. and A. White, Valuing Credit Default Swaps II: Modeling Default Correlations

9246: 7003: 6955: 6557: 677:

Please help update this article to reflect recent events or newly available information.

10794: 10779: 10748: 10733: 10700: 10566: 10357: 10322: 10085: 10050: 10013: 9153: 9091: 7686: 7610: 6225: 5786: 4518: 4357: 3067: 2963: 2943: 1556: 1530: 1362: 771: 752: 702: 550: 369: 365: 123: 66: 9758: 8891: 7962: 6278: 6172: 800:

pension fund, its risk of loss due to Risky Corp defaulting on the bond is eliminated.

166: 49:

agreement that the seller of the CDS will compensate the buyer in the event of a debt

10799: 10789: 10728: 10715: 10690: 10576: 10362: 10158: 9368: 9084: 8911: 7744: 7733: 7690: 7682: 7618: 7614: 7576: 7220: 7059: 6883: 6702: 6484: 6378: 6331: 6229: 5841: 4403: 2797: 1731: 1473: 1461: 1157:, by late 2009 the bank JP Morgan alone now had about 30% of the global CDS market. 839: 451: 403: 265: 257: 246: 50: 9833: 9234: 8965: 7248: 6733: 720:

Despite these concerns, former United States Secretary of the Treasury Geithner and

671:

Parts of this article (those related to legality of naked CDS in Europe) need to be

77:. The payment received is often substantially less than the face value of the loan. 10680: 10619: 10614: 10596: 10526: 10292: 10287: 10259: 10211: 10090: 10030: 9363:

Ari J. Brandes (July 21, 2008). "A Better Way to Understand Credit Default Swaps".

7678: 7602: 6480: 6476: 6460:

Koresh, Galil; Shapir, Offer Moshe; Amiram, Dan; Ben-Zion, Uri (November 1, 2018).

6217: 5912: 5886: 2772: 1444: 1354: 1300: 1154: 922: 855: 569: 486: 427: 414: 119: 7446: 10890: 10860: 10855: 10809: 10645: 10640: 10586: 10496: 10404: 10377: 10317: 10312: 10282: 10231: 10216: 10133: 10113: 9690: 6155: 4150:{\displaystyle -{\frac {Nc}{4}}(\delta _{1}+\delta _{2}+\delta _{3}+\delta _{4})} 3247: 1870: 1856: 1842: 1718: 1543: 1457: 1366: 1344: 1308: 1246: 1196:

also provides one location for regulators to view traders’ positions and prices.

1048:

in March. An alternative view is that this surge in CDS protection buyers was a

788: 562: 529: 450:

When entering into a CDS, both the buyer and seller of credit protection take on

326: 284: 9465: 9451:

Commodity Futures Modernization Act of 2000, H.R. 5660, 106th Cong. § 117(e)(2).

815:

Although credit default swaps have been highly criticized for their role in the

10865: 10850: 10650: 10561: 10511: 10488: 10469: 10297: 10239: 10206: 10201: 10181: 10105: 9698: 8926: 7395: 6200: 6004: 5907: 5782: 5768: 5698: 2748: 1922: 1908: 1786: 1772: 1636: 1242: 1045: 970: 914: 862:

in its share price, since buyers of a company usually end up paying a premium.

558: 478: 477:

As is true with other forms of over-the-counter derivatives, CDS might involve

459: 410: 395: 103: 70: 46: 6856:

Gensler, Gary, Chairman Commodity Futures Trading Commission (March 9, 2010).

6363:; Skeel, David A. Jr. (2007). "The Promise And Perils of Credit Derivatives". 6221: 1249:. The period over which default protection extends is defined by the contract 1160: 10905: 10845: 10814: 10655: 10581: 10541: 10536: 10372: 10244: 10191: 10186: 10168: 10065: 10045: 8811: 8784: 6399:. Depository Trust & Clearing Corporation. March 23, 2010. Archived from 6360: 6148: 5999: 5930: 5916: 5856: 5830: 5814: 5702: 3023: 1623: 1448: 1118: 1100:

In 2009 the U.S. Securities and Exchange Commission granted an exemption for

906: 643: 638: 546: 490: 418: 238: 91: 7589:

Capital Structure Arbitrage: Investigation using Stocks and High Yield Bonds

7445:. Office of the Comptroller of the Currency. August 12, 1996. Archived from 6978:"S&P Capital IQ Announces Acquisition of Credit Market Analysis Limited" 1142:

creation of different types of products (Mahadevan cited in Bloomberg 2009).

10665: 10439: 10367: 10347: 10307: 10176: 10148: 10138: 10080: 8781:"Isda Ceo Notes Success Of Lehman Settlement, Addresses Cds Misperceptions" 7728: 7029: 1492: 1465: 938: 709: 269: 261: 54: 6397:"Media Statement: DTCC Policy for Releasing CDS Data to Global Regulators" 5217:

Grouped by cash flow direction (receiving protection and paying premium):

545:

and attempt to profit from that view by entering into a trade, known as a

10546: 10414: 10385: 10381: 10332: 10123: 10118: 8837: 8435: 7606: 6929: 5855:

The problem lies if one of the companies in the chain fails, creating a "

5837: 5723: 1704: 1690: 1205: 1002:

legal and financial limbo. U.K. authorities expressed the same concerns.

953:

Mindful of the concentration of default risk as one of the causes of the

792: 525: 330: 294:

If the reference entity (i.e., Risky Corp) defaults, one of two kinds of

218:

However, if the associated credit instrument suffered a credit event at t

142: 6906:. International Swaps and Derivatives Association (ISDA). Archived from 4406:

with a time-constant determined by the credit spread, or mathematically

2800:

events never occurred the price of a CDS would simply be the sum of the

1044:

access to wholesale capital, which eventually led to its forced sale to

613:

In another scenario, after one year the market now considers Risky much

10870: 10506: 10501: 10267: 10153: 9972:" Analyzes the CDS market's performance in the Lehman Bros. bankruptcy. 7915:"The Long Awaited Arrival of Credit Derivatives, December–January 1997" 6563: 1758: 1744: 1676: 1662: 1649: 1385: 884: 576: 61: 9669: 8533:"As One JPMorgan Trader Sold Risky Contracts, Another One Bought Them" 7308:"Greek Debt Crisis Is At The Center Of The Credit Default Swap Debate" 7053: 2782:

the recovery rate (percentage of notional repaid in event of default),

10060: 9982: 7056:

Collateralized Debt Obligations: Structures and Analysis, 2nd Edition

7026:"Publications: OCC's Quarterly Report on Bank Derivatives Activities" 6718:

Cox, Christopher, Chairman, U.S. Securities and Exchange Commission.

3936:{\displaystyle -{\frac {Nc}{4}}(\delta _{1}+\delta _{2}+\delta _{3})} 1814: 1800: 1327: 1320: 1106: 831: 533: 303: 250: 231: 9794: 9321:"Federal Income Taxation of Securitization Transactions: Cumulative" 7770: 6954:. Depository Trust & Clearing Corporation (DTCC). Archived from 3018:

a default occurs on the first, second, third or fourth payment date.

10630: 10352: 10249: 10070: 9611:

external links, and converting useful links where appropriate into

9320: 9318: 8634: 7054:

Lucas, Douglas; Laurie S. Goodman; Frank J. Fabozzi (May 5, 2006).

6828:"Do We Need Central Counterparty Clearing of Credit Default Swaps?" 5805: 1229:

referencing the credit derivatives definitions as published by the

621:

from 500 to 250 basis points. Again, the hedge fund may choose to

302:

the investor delivers a defaulted asset to Bank for payment of the

9300: 9237:, Wall Street Journal, Serena Ng, 2009 May 1. Retrieved 2010 4 23. 9190:

Credit Default Swaps: Monolines faces litigious and costly endgame

9180:, Christine Richard, bloomberg, jan 22, 2008. Retrieved 2010 4 29. 6907: 4354:. The probability of no default occurring over a time period from 7991: 7280:"Naked Swaps Crackdown in Europe Rings Hollow Without Washington" 6635:"Banning 'Naked' Default Swaps May Raise Corporate Funding Costs" 5743:

by hastening the demise of companies such as Lehman Brothers and

1884: 1393: 780: 334: 317:, i.e., not all the investor's money is lost), which is known as 9201: 8269:"Credit-Default Swaps on Italy, Spain Are Most Traded (Update1)" 6424:"The Long and Short of It: The Post-Crisis Corporate CDS Market" 1479:

Below is a list of the auctions that have been held since 2005.

1333: 21: 10885: 9824:

The spectacular boom and calamitous bust in derivatives trading

9288:. All things Considered, National Public Radio. Oct 31, 2008. 9178:

Ambac, MBIA Lust for CDO Returns Undercut AAA Success (Update2)

6734:"United States: Credit Default Swaps: A Brief Insurance Primer" 6594: 879:

Existence of buyers constrained from buying exotic derivatives.

762:

Another kind of hedge is against concentration risk. A bank's

9884:

Hedge Funds in Swaps Face Peril With Rising Junk Bond Defaults

9749:"Valuing Credit Default Swaps I: No Counterparty Default Risk" 9487:"Final Results of the Movie Gallery Auction, October 23, 2007" 9192:, Aug 2008, Louise Bowman, euromoney.com. Retrieved 2010 4 29. 9131:"Berkshire Asked by SEC in June for Derivative Data (Update1)" 9030:"/ Financials — Lehman CDS pay-outs higher than expected" 6558:

International Swaps and Derivatives Association, Inc. (ISDA).

847:

between a company's CDS and its equity in certain situations.

29: 7002:. Depository Trust & Clearing Corporation. Archived from 5694: 2789: 1307:

as a credit event, whereas trades referencing North American

918: 733: 606:

from 500 to 1500 basis points. The hedge fund may choose to

114:

Most CDSs are documented using standard forms drafted by the

8433: 8291:"DTCC " DTCC Deriv/SERV Trade Information Warehouse Reports" 6632: 6279:"Credit default swaps: Heading towards a more stable system" 141:, regulators, and the media to monitor how the market views 9765:

Elton et al., Explaining the rate spread on corporate bonds

9319:

Peaslee, James M.; David Z. Nirenberg (November 26, 2007).

8436:"OTC derivatives market activity in the first half of 2011" 7028:. Office of the Comptroller of the Currency. Archived from 6171:. Isdacdsmarketplace.com. December 31, 2010. Archived from 6059:"CDOs Are Back: Will They Lead to Another Financial Crisis" 5994: 5810: 5715: 2768: 2744:

trade at a considerably lower spread than corporate bonds.

1829: 1161:

Government approvals relating to ICE and its competitor CME

122:

default swaps (BDSs), index CDSs, funded CDSs (also called

9871:

Schwartz, Nelson D. and Creswell, Julie (March 23, 2008),

9249:

Apr 9, 2010, Reuters, Edith Honan, ed. Gerald E. McCormick

8808:"How Greece's Default Could Kill The Sovereign CDS Market" 7357: 6459: 1962: 1948: 633:

Credit default swaps are also used to structure synthetic

8489:

Leising, Matthew; Harrington, Shannon D (March 6, 2009).

3719:{\displaystyle -{\frac {Nc}{4}}(\delta _{1}+\delta _{2})} 1068: 9975:

Boumlouka, Makrem (April 8, 2009), Wall Street Letter: "

9666:

Federal Reserve Bank of Chicago, Financial Markets Group

7358:

Kern, Steffen; Deutsche Bank Research (March 17, 2010).

7277: 2832:

with four quarterly premium payments occurring at times

9261:"AIG, the Global Financial System and Investor Anxiety" 9247:

UPDATE 1-Judge dismisses most of MBIA's suit vs Merrill

8939:

The Pricing and Risk Management of Credit Default Swaps

8458: 8456: 7080:"SEC charges Goldman Sachs with fraud in subprime case" 6932:. Bank for International Settlements. December 20, 2001 6272: 6270: 6268: 6266: 6203:"Credit Derivatives: Systemic Risks and Policy Options" 1472:. For its part, ISDA in the leadup to a 50% or greater 717:, accused naked CDS buyers of making the crisis worse. 8635:

Jessica Silver-Greenberg; Peter Eavis (May 10, 2012).

6633:

Kopecki, Dawn; Shannon D. Harrington (July 24, 2009).

6264: 6262: 6260: 6258: 6256: 6254: 6252: 6250: 6248: 6246: 364:

by the policy holder on an asset in which it holds an

116:

International Swaps and Derivatives Association (ISDA)

9664:

Understanding Derivatives: Markets and Infrastructure

9425: 9423: 8728:"Settlement Auction for Lehman CDS: Surprises Ahead?" 8041:"Credit Derivatives, Macro Risks, and Systemic Risks" 7945: 7943: 7824: 7822: 7437: 7435: 5499: 5256: 5228: 5088: 4917: 4769: 4650: 4577: 4549: 4521: 4488: 4412: 4380: 4360: 4329: 4302: 4275: 4248: 4186: 4164: 4073: 3997: 3950: 3872: 3844: 3780: 3733: 3668: 3640: 3586: 3539: 3493: 3465: 3427: 3380: 3358: 3330: 3283: 3256: 3219: 3192: 3165: 3132: 3090: 3070: 3035: 2986: 2966: 2946: 2919: 2892: 2865: 2838: 2811: 1186: 329:. For example, if the CDS spread of Risky Corp is 50 9296: 9294: 8453: 8192:

Analysis, James B. Kelleher - (September 18, 2008).

7830:"The Dream Machine: Invention of Credit Derivatives" 7659: 3213:

and the probability of a default being triggered is

9924:

Behind Insurer’s Crisis, Blind Eye to a Web of Risk

9911:

Kelleher, James B. (September 18, 2008), Reuters: "

8688:"Euro-Parliament bans "naked" Credit Default Swaps" 6243: 6108: 6106: 6104: 6102: 2980:then the size of the quarterly premium payments is 1264:who is responsible for making determinations as to 9929:Varchaver, Nicholas and Benner, Katie (Sep 2008), 9828:Pulliam, Susan and Ng, Serena (January 18, 2008), 9420: 9408:I.R.S. REG-111283-11, IRB 2011-42 (Oct. 17, 2011). 9384: 9382: 9033: 8753: 8637:"JPMorgan Discloses $ 2 Billion in Trading Losses" 8491:"Intercontinental to Clear Credit Swaps Next Week" 8410: 8168: 8090:. The Financial Services Authority. Archived from 8048:Economic Review (FRB Atlanta), Fourth Quarter 2007 7940: 7819: 7732: 7432: 7278:Moshinsky, Ben; Aaron Kirchfeld (March 11, 2010). 7189: 7111: 7109: 7107: 7105: 7103: 7101: 6595:Federal Reserve Bank of Atlanta (April 14, 2008). 6530:Economic Review (FRB Atlanta), Fourth Quarter 2007 6516: 6514: 6512: 6510: 6508: 6506: 6504: 6502: 6500: 6498: 5767:offsetting positions. Furthermore, CDS deals are 5675: 5480: 5241: 5204: 5069: 4898: 4750: 4631: 4562: 4527: 4503: 4474: 4395: 4366: 4342: 4315: 4288: 4261: 4229: 4171: 4149: 4053: 3982: 3935: 3857: 3826: 3765: 3718: 3653: 3622: 3571: 3524: 3478: 3447: 3412: 3365: 3343: 3296: 3269: 3238: 3205: 3178: 3151: 3107: 3076: 3056: 3003: 2972: 2952: 2932: 2905: 2878: 2851: 2824: 1220: 598:After 1 year, the market now considers Risky Corp 524:Credit default swaps can be used by investors for 9595:may not follow Knowledge's policies or guidelines 9291: 8954:ENNs for Corporate and Sovereign CDS and FX Swaps 8512:Zuckerman, Gregory; Burne, Katy (April 6, 2012). 8488: 7156:"Should you be able to sell what you do not own?" 6355: 6353: 6351: 6349: 6347: 6310: 6308: 6306: 6304: 6302: 6169:"ISDA: CDS Marketplace :: Market Statistics" 200:and so on until the end of the contract at time t 10903: 9286:Unregulated Credit Default Swaps Led to Weakness 9005:"Protecting GM from Credit Default Swap Holders" 8922: 8920: 8382: 8380: 8378: 8316: 8314: 8312: 7478:"The Long Awaited Arrival of Credit Derivatives" 6597:"Did You Know? A Primer on Credit Default Swaps" 6099: 6037:The link is to an earlier version of this paper. 1067:Also in September American International Group ( 921:, which faced the threat of $ 5 billion in 9776:The Real Reason for the Global Financial Crisis 9659:International Swaps and Derivatives Association 9554:International Swaps and Derivatives Association 9529:International Swaps and Derivatives Association 9504:International Swaps and Derivatives Association 9379: 9258: 9202:Supreme Court of New York County (April 2009). 8979:"Gannett and the Side Effects of Default Swaps" 8352: 8194:"Buffett's "time bomb" goes off on Wall Street" 7098: 6673:"Credit default swaps: What are they good for?" 6560:"24. Product description: Credit default swaps" 6495: 6121:International Swaps and Derivatives Association 3126:The probability of surviving over the interval 2785:the "credit curve" for the reference entity and 1454:International Swaps and Derivatives Association 1311:corporate reference entities typically do not. 1231:International Swaps and Derivatives Association 1225:A CDS contract is typically documented under a 1031: 931:European Bank of Reconstruction and Development 873:Shortages in a particular underlying instrument 9913:Buffett's 'time bomb' goes off on Wall Street. 9362: 8582: 8511: 8394: 7867:"Meltdown 101: What are credit default swaps?" 7848:"How the structured credit revolution started" 7396:"Greece Govt Bond 10 Year Acting as Benchmark" 6784:"Are credit default swaps insurance products?" 6344: 6299: 5987:, an Oscar-winning documentary film about the 748:cancel out the losses on the underlying debt. 549:, that combines a CDS with a cash bond and an 9998: 9856:Arcane Market is Next to Face Big Credit Test 9800:List of CDS premiums of various countries in 8917: 8375: 8323:"ICE's Jeffrey Sprecher: The Sultan of Swaps" 8309: 8136: 8134: 7845: 7660:Smithson, Charles; David Mengle (Fall 2006). 7600: 6590: 6588: 6586: 6584: 2432:Financial Guarantee Insurance Compancy (FGIC) 1334:Credit default swap and sovereign debt crisis 791:of $ 10 million. The CDS trades at 200 653: 352: 176:and makes regular premium payments at times t 9154:"Berkshire Hathaway Inc. Annual Report 2008" 9085:"Berkshire Hathaway Inc. Annual Report 2002" 8783:. Isda.org. October 21, 2008. Archived from 8320: 7723: 7721: 7719: 7717: 7715: 7333:"E.U. Derivatives Ban Won't Work, U.S. Says" 7273: 7271: 7049: 7047: 6888:: CS1 maint: multiple names: authors list ( 6701:pg G-11. Boston: Pearson Custom Publishing. 6359: 6336:: CS1 maint: multiple names: authors list ( 6277:Weistroffer, Christian (December 21, 2009). 5875: 4632:{\displaystyle (1-p_{1})N(1-R)\delta _{1}\,} 1340:Causes of the European sovereign-debt crisis 637:(CDOs). Instead of owning bonds or loans, a 9906:First Comes the Swap. Then It’s the Knives. 9314: 9312: 8775: 8773: 8750:"In depth: Fed to hold CDS clearance talks" 8267:Harrington, Shannon D. (November 5, 2008). 7836:. March 24, 2006. Retrieved March 17, 2009. 7655: 7653: 7587:Chatiras, Manolis, and Barsendu Mukherjee. 7482:Derivatives Strategy, December/January 1997 7206: 7182:"Time to outlaw naked credit default swaps" 6930:"Regular OTC Derivatives Market Statistics" 6759:"Credit default swap market under scrutiny" 6628: 6626: 6421: 6276: 6082:"Credit event auctions: Why do they exist?" 5795:Depository Trust & Clearing Corporation 4475:{\displaystyle p=\exp(-s(t)\Delta t/(1-R))} 3525:{\displaystyle -{\frac {Nc}{4}}\delta _{1}} 1183:Chief Executive Officer Duncan Niederauer. 1091:Depository Trust & Clearing Corporation 982:accounting for about $ 50 billion of this. 967:Commodity Futures Modernization Act of 2000 99: 96:Depository Trust & Clearing Corporation 16:Financial swap agreement in case of default 10005: 9991: 9918:Morgenson, Gretchen (September 27, 2008), 9550:"2014 ISDA Credit Derivatives Definitions" 9525:"2003 ISDA Credit Derivatives Definitions" 9500:"1999 ISDA Credit Derivatives Definitions" 9032:. Ft.com. October 10, 2008. Archived from 9024: 9022: 8628: 8556: 8530: 8266: 8167:. Ft.com. October 11, 2008. Archived from 8140: 8131: 7799: 7764: 7762: 7760: 7058:. John Wiley & Sons Inc. p. 221. 6851: 6849: 6847: 6581: 4054:{\displaystyle p_{1}p_{2}p_{3}(1-p_{4})\,} 3246:. The calculation of present value, given 1392:. In particular, concerns arising out of 394:Insurers manage risk primarily by setting 73:in existence, a protocol exists to hold a 9882:Evans, David (May 20, 2008), Bloomberg: " 9850:Morgenson, Gretchen (February 17, 2008), 9822:Goodman, Peter (Oct 2008) New York Times 9710: 9686:"A billion-dollar game for bond managers" 9631:Learn how and when to remove this message 9464:. Fasb.org. June 15, 1999. Archived from 8833:"No Greek CDS payout on swap, panel says" 8325:. Bloomberg Business Week. Archived from 8242:"Banks hit back at derivatives criticism" 8015:"Trying to Put Some Reins on Derivatives" 7712: 7471: 7469: 7467: 7268: 7149: 7147: 7145: 7044: 6756: 6731: 5238: 5070:{\displaystyle +p_{1}p_{2}p_{3}(1-p_{4})} 4628: 4559: 4168: 4050: 3979: 3823: 3762: 3619: 3568: 3444: 3409: 3362: 1295:with respect to the reference entity and 1233:. The confirmation typically specifies a 1082:for CDS transactions; they were all done 565:" on the CDS and the underlying credit. 514:Office of the Comptroller of the Currency 500: 438:are met. In practice this rarely happens; 9977:Credit Default Swap Market: "Big Bang"? 9680:A Beginner's Guide to Credit Derivatives 9356: 9309: 8949: 8947: 8770: 8585:"Chart of the Day: London Whale trading" 8550: 8403:"Worries Remain Even After CDS Clean-Up" 8348: 8346: 8344: 8191: 7952:"Credit Derivatives in Emerging Markets" 7949: 7650: 7301: 7299: 7297: 6781: 6699:Derivatives and Alternative Investments. 6666: 6664: 6662: 6660: 6658: 6656: 6654: 6652: 6623: 6415: 6196: 6194: 6192: 6190: 5756:General Motors Chapter 11 reorganization 2738: 1343: 1314:Finally, standard CDS contracts specify 1018: 1009: 838:Techniques reliant on this are known as 432:Generally Accepted Accounting Principles 28: 20: 10830:Power reverse dual-currency note (PRDC) 10770:Constant proportion portfolio insurance 9082: 9019: 8602: 7769:Philips, Matthew (September 27, 2008). 7768: 7757: 7212: 7123:. Brookings Institution. Archived from 6855: 6844: 6757:Morgenson, Gretchen (August 10, 2008). 6670: 6079: 5836:For example, imagine if a hypothetical 2663:Houghton Mifflin Harcourt Publishing Co 959:U.S. Securities and Exchange Commission 883:The difference between CDS spreads and 409:CDS contracts are generally subject to 10904: 10012: 9943: 9863:Credit Default Swaps: The Next Crisis? 9697: 9682:- Nomura International Probability.net 9259:Investing Daily (September 16, 2008). 8841:, March 1, 2012. Retrieved 2012-03-01. 8805: 8239: 8143:"The truth about credit default swaps" 7581:: CS1 maint: archived copy as title ( 7506: 7464: 7305: 7153: 7142: 6825: 6819: 6286:Deutsche Bank Research: Current Issues 6050: 1316:deliverable obligation characteristics 9986: 9655:2003 ISDA Credit Derivatives Template 9083:Buffett, Warren (February 21, 2003). 8944: 8662:"2003 Credit Derivatives Definitions" 8524: 8341: 8013:Atlas, Riva D. (September 16, 2005). 8012: 7912: 7864: 7795: 7793: 7791: 7475: 7351: 7294: 7249:"Opinion: One Way to Stop Bear Raids" 7246: 7240: 7115: 6952:"Trade Information Warehouse Reports" 6649: 6455: 6453: 6451: 6187: 6061:. University of Pennsylvania. Wharton 5961:Constant maturity credit default swap 5688: 3827:{\displaystyle p_{1}p_{2}(1-p_{3})\,} 1199: 1170:generated from processing the swaps. 969:, which was also responsible for the 10765:Collateralized debt obligation (CDO) 9900:Morgenson, Gretchen (June 1, 2008), 9703:Stanford Graduate School of Business 9575: 9204:"MBIA Insurance Co. v Merrill Lynch" 9128: 8514:"'London Whale' Rattles Debt Market" 8441:. Bank for International Settlements 8400: 8038: 7894:. Federal Reserve Board. May 5, 2005 7727: 7670:Journal of Applied Corporate Finance 7306:Jacobs, Stevenson (March 10, 2010). 6732:Garbowski, Mark (October 24, 2008). 6056: 4899:{\displaystyle +p_{1}p_{2}(1-p_{3})} 4230:{\displaystyle p_{1}p_{2}p_{3}p_{4}} 2762: 1173:SEC spokesperson John Nestor stated 1112: 1005: 963:Commodity Futures Trading Commission 722:Commodity Futures Trading Commission 657: 9895:Moody's issues warning on CDS risks 9151: 8576: 7988:"ISDA Market Survey, Year-End 2008" 7179: 6782:Frielink, Karel (August 10, 2008). 6366:University of Cincinnati Law Review 6142: 5940: 3983:{\displaystyle N(1-R)\delta _{4}\,} 3766:{\displaystyle N(1-R)\delta _{3}\,} 3572:{\displaystyle N(1-R)\delta _{2}\,} 3413:{\displaystyle N(1-R)\delta _{1}\,} 1404: 1287:CDS confirmations also specify the 256:A "credit default swap" (CDS) is a 13: 9968:October 19, 2008, Portfolio.com: " 9839:Das, Satayjit (February 5, 2008), 9674:Bank for International Settlements 9263:. Kciinvesting.com. Archived from 9060:. October 28, 2008. Archived from 8434:Monetary and Economic Department. 8240:Bowers, Simon (November 5, 2008). 7950:Ranciere, Romain G. (April 2002). 7788: 7771:"The Monster That Ate Wall Street" 7516:Virginia Law & Business Review 7116:Litan, Robert E. (April 7, 2010). 6671:Leonard, Andrew (April 20, 2010). 6520: 6448: 6158:. Latest available a/o 2012-03-01. 4443: 4387: 2771:(risk-adjusted NPV) model used in 2509:Truvo (formerly World Directories) 1361:; international trade imbalances; 1260:The confirmation also specifies a 1187:Clearing house member requirements 617:to default, so its CDS spread has 602:to default, so its CDS spread has 434:(GAAP) unless the requirements of 424:while insurance contracts are not; 14: 10938: 9944:Dizard, John (October 23, 2006). 9845:CDS market may create added risks 9701:(1998). "Credit Swap Valuation". 9571: 8941:, OpenGamma Quantitative Research 8730:. Seeking Alpha. October 10, 2008 8710:"Risk.Net :: Special Report" 8353:Robert E. Litan (April 7, 2010). 7865:Simon, Ellen (October 20, 2008). 7800:Lanchester, John (June 1, 2009). 7154:Buiter, Willem (March 16, 2009). 6904:"Surveys & Market Statistics" 6826:Kramer, Stefan (April 20, 2010). 6523:"Credit Derivatives: An Overview" 6462:"The Determinants of CDS Spreads" 6314: 6080:Pollack, Lisa (January 5, 2012). 1074:In 2008 there was no centralized 10884: 9937:" - on CDS spotlight during the 9889:van Duyn, Aline (May 28, 2008), 9580: 9542: 9517: 9492: 9480: 9454: 9445: 9432: 9411: 9402: 9393: 9279: 9252: 9240: 9228: 9195: 9183: 9171: 9145: 9129:Holm, Erik (November 21, 2008). 9122: 9105: 9076: 9050: 8997: 8971: 8959: 8390:. Bloomberg News. March 7, 2009. 7683:10.1111/j.1745-6622.2006.00111.x 7247:Soros, George (March 24, 2009). 6435:Federal Reserve Bank of New York 6149:ISDA 2010 MID-YEAR MARKET SURVEY 6031: 5820: 5709: 5676:{\displaystyle -{\frac {Nc}{4}}} 3623:{\displaystyle p_{1}(1-p_{2})\,} 3119: 2940:. If the nominal for the CDS is 2759:, uses a no-arbitrage approach. 1270:substitute reference obligations 976: 662: 211: 165: 9935:The $ 55 Trillion Question 9813:Zweig, Phillip L. (July 1997), 9802:English translation from German 8932: 8901: 8885: 8860: 8844: 8825: 8806:Salmon, Felix (March 1, 2012). 8799: 8742: 8720: 8702: 8690:. EUbusiness. November 16, 2011 8680: 8654: 8583:Farah Khalique (May 11, 2012). 8505: 8482: 8427: 8283: 8260: 8233: 8211: 8185: 8157: 8109: 8073: 8032: 8006: 7980: 7906: 7884: 7858: 7839: 7594: 7544: 7500: 7410: 7388: 7325: 7173: 7072: 7018: 6992: 6970: 6944: 6922: 6896: 6801: 6775: 6750: 6725: 6712: 6691: 6422:Boyarchenko, Nina (June 2020). 6389: 6022: 4751:{\displaystyle +p_{1}(1-p_{2})} 1491:Final price as a percentage of 1221:Terms of a typical CDS contract 948:collateralized debt obligations 870:Specific settlement differences 805: 635:collateralized debt obligations 375:The other differences include: 295: 172:Buyer purchased a CDS at time t 10592:Year-on-year inflation-indexed 9970:Why the CDS Market Didn't Fail 9785:Demystifying the Credit Crunch 9113:"Pay-up time for Lehman swaps" 8559:"Making Waves Against 'Whale'" 8321:Chad Terhune (July 29, 2010). 7522:(1): 69–78, 80. Archived from 7398:. Bloomberg.com. March 8, 2012 6481:10.1016/j.jbankfin.2013.12.005 6469:Journal of Banking and Finance 6161: 6073: 5670: 5518: 5475: 5462: 5443: 5397: 5378: 5342: 5323: 5297: 5278: 5275: 5272: 5260: 5184: 5132: 5064: 5061: 5022: 4991: 4979: 4973: 4970: 4951: 4893: 4890: 4864: 4833: 4821: 4815: 4812: 4793: 4745: 4704: 4692: 4686: 4683: 4664: 4615: 4603: 4597: 4578: 4498: 4492: 4469: 4466: 4454: 4440: 4434: 4425: 4144: 4092: 4047: 4028: 3966: 3954: 3930: 3891: 3820: 3801: 3749: 3737: 3713: 3687: 3616: 3597: 3555: 3543: 3396: 3384: 3051: 3039: 2747:The second model, proposed by 1278:publicly available information 876:The cost of funding a position 539: 430:may not be available under US 156: 106:outstanding" as of June 2018. 1: 10602:Zero-coupon inflation-indexed 9834:Default Fears Unnerve Markets 9650:CBS '60 minutes' video on CDS 8557:Katy Burne (April 10, 2012). 8221:. Sec.gov. September 23, 2008 8141:Colin Barr (March 16, 2009). 7846:Alex Chambers (May 1, 2006). 7213:Leopold, Les (June 2, 2009). 6044: 5763: 5733: 5701:, whereas Hull and White use 3186:without a default payment is 2377:METRO-GOLDWYN-MAYER INC. LCDS 1399: 1390:United States Bankruptcy Code 1061:bankruptcy of Lehman Brothers 900: 74: 10927:United States housing bubble 9399:Peaslee & Nirenberg, 89. 7219:. Chelsea Green Publishing. 5883:notional principal contracts 4350:can be calculated using the 1382:Greek government-debt crisis 1241:, usually an unsubordinated 1032:Regulatory concerns over CDS 895: 822: 715:Greek government-debt crisis 7: 10805:Foreign exchange derivative 10197:Callable bull/bear contract 9007:. Firedoglake. May 14, 2009 8531:Azam Ahmed (May 15, 2012). 8088:Financial Risk Outlook 2006 7959:IMF Policy Discussion Paper 7507:Miller, Ken (Spring 2009). 6154:September 13, 2011, at the 5949: 5863: 3297:{\displaystyle \delta _{4}} 3270:{\displaystyle \delta _{1}} 2718:Alpha Appalachia Hldgs Inc 2146:Charter Communications LCDS 1434: 1365:that have since burst; the 992:1997 Asian Financial Crisis 828:Capital Structure Arbitrage 732:Germany's market regulator 10: 10943: 9939:2007–2008 financial crisis 9670:BIS - Regular Publications 9209:. mbia.com. Archived from 8868:"Year Credit Event Fixing" 8664:. Isda.org. Archived from 8293:. Dtcc.com. Archived from 8054:(4): 43–69. Archived from 7990:. Isda.org. Archived from 6057:Azad, C (April 10, 2013). 5989:2007–2008 financial crisis 5956:Bucket shop (stock market) 5868: 5827:2007–2008 financial crisis 5776:2007–2008 financial crisis 5741:2007–2008 financial crisis 4396:{\displaystyle t+\Delta t} 2685:Caesars Entmt Oper Co Inc 2135:Charter Communications CDS 1359:2007–2008 financial crisis 1337: 1255:scheduled termination date 817:2007–2008 financial crisis 742: 654:Naked credit default swaps 648:mortgage-backed securities 353:Differences from insurance 88:2007–2008 financial crisis 80: 10879: 10838: 10757: 10714: 10706:Stock market index future 10610: 10487: 10395: 10258: 10167: 10104: 10038: 10029: 10020: 9877:Who Created This Monster? 8910:(Prof. Christopher Foot, 7739:. Little Brown. pp. 6222:10.5089/9781451874006.001 6010:Intercontinental Exchange 5971:Credit default swap index 5876:Tax and accounting issues 3448:{\displaystyle 1-p_{1}\,} 2960:and the issue premium is 2201:General Growth Properties 1102:Intercontinental Exchange 696:naked credit default swap 519: 344:CDS spread is considered 288: 268:or experiences a similar 53:(by the debtor) or other 10825:Mortgage-backed security 10820:Interest rate derivative 10795:Equity-linked note (ELN) 10780:Credit-linked note (CLN) 9235:MBIA Sues Merrill Lynch 8894:(Prof. Chris Lamoureux, 8855:Tradeable Credit Fixings 8752:. Ft.com. Archived from 8165:"Bad news on Lehman CDS" 6375:University of Cincinnati 6015: 5896:Internal Revenue Service 2421:NJSC Naftogaz of Ukraine 2256:R.H. Donnelley Corp. CDS 1583:Dana Holding Corporation 1355:globalisation of finance 1038:collapse of Bear Stearns 413:accounting, introducing 137:CDS data can be used by 10775:Contract for difference 10076:Risk-free interest rate 9946:"A billion dollar game" 9807: 9780:Financial Sense Archive 8857:. Retrieved 2008-10-28. 8563:The Wall Street Journal 8518:The Wall Street Journal 7254:The Wall Street Journal 6697:CFA Institute. (2008). 5978:, reference entity code 5923: 3239:{\displaystyle 1-p_{i}} 3152:{\displaystyle t_{i-1}} 2234:HLI Operating Corp LCDS 1280:delivered along with a 630:the two CDS contracts. 445: 139:financial professionals 132:asset-backed securities 128:special purpose vehicle 109: 10557:Forward Rate Agreement 9789:Private Equity Council 9728:Cite journal requires 9344:Cite journal requires 9323:. Supplement No. 7: 83 8716:on September 29, 2007. 8464:"Report Center - Data" 7638:Cite journal requires 6123:(ISDA). Archived from 5991:by Charles H. Ferguson 5871:Category:Systemic risk 5677: 5482: 5481:{\displaystyle N(1-R)} 5243: 5206: 5071: 4900: 4752: 4633: 4564: 4529: 4505: 4476: 4397: 4368: 4344: 4317: 4290: 4263: 4231: 4173: 4151: 4055: 3984: 3937: 3859: 3828: 3767: 3720: 3655: 3624: 3573: 3526: 3480: 3449: 3414: 3367: 3345: 3298: 3271: 3240: 3207: 3180: 3153: 3109: 3078: 3058: 3057:{\displaystyle N(1-R)} 3005: 2974: 2954: 2934: 2907: 2880: 2853: 2826: 1897:Millennium America Inc 1350: 1180: 1144: 1024: 1016: 927:Exxon Valdez oil spill 887:spreads is called the 501:Sources of market data 147:Credit Rating Agencies 100:Sources of Market Data 34: 26: 10785:Credit default option 10129:Employee stock option 9797:William Sjostrom, Jr. 9753:University of Toronto 8896:University of Arizona 8872:www.creditfixings.com 8466:. ICE. Archived from 8362:Brookings Institution 5976:CUSIP Linked MIP Code 5966:Credit default option 5678: 5483: 5244: 5242:{\displaystyle PV=\,} 5207: 5072: 4901: 4753: 4634: 4565: 4563:{\displaystyle PV=\,} 4530: 4506: 4477: 4398: 4369: 4345: 4343:{\displaystyle p_{4}} 4318: 4316:{\displaystyle p_{3}} 4291: 4289:{\displaystyle p_{2}} 4264: 4262:{\displaystyle p_{1}} 4232: 4174: 4152: 4056: 3985: 3938: 3860: 3858:{\displaystyle t_{4}} 3829: 3768: 3721: 3656: 3654:{\displaystyle t_{3}} 3625: 3574: 3527: 3481: 3479:{\displaystyle t_{2}} 3450: 3415: 3368: 3346: 3344:{\displaystyle t_{1}} 3299: 3272: 3241: 3208: 3206:{\displaystyle p_{i}} 3181: 3179:{\displaystyle t_{i}} 3154: 3110: 3079: 3059: 3006: 2975: 2955: 2935: 2933:{\displaystyle t_{4}} 2908: 2906:{\displaystyle t_{3}} 2881: 2879:{\displaystyle t_{2}} 2854: 2852:{\displaystyle t_{1}} 2827: 2825:{\displaystyle t_{0}} 2739:Pricing and valuation 2553:Ambac Financial Group 2520:Boston Generating LLC 2498:Truvo Subsidiary Corp 2322:RH Donnelley Inc LCDS 2289:JSC Alliance Bank CDS 1470:Greek government debt 1347: 1175: 1139: 1089:In November 2008 the 1022: 1013: 911:J.P. Morgan & Co. 260:contract between two 94:. In March 2010, the 32: 24: 10739:Inflation derivative 10724:Commodity derivative 10696:Single-stock futures 10686:Normal backwardation 10676:Interest rate future 10517:Conditional variance 10023:Derivative (finance) 9601:improve this article 9267:on February 10, 2009 9216:on December 18, 2010 9159:. Berkshire Hathaway 9038:on December 10, 2022 8908:Credit Default Swaps 8787:on December 13, 2010 8758:on December 10, 2022 8470:on February 22, 2012 8415:on December 10, 2022 8297:on December 12, 2009 8173:on December 10, 2022 7919:Derivatives Strategy 7607:10.2139/ssrn.3405367 7194:on December 10, 2022 7130:on December 22, 2010 7032:on December 26, 2007 7006:on November 13, 2007 6980:. S&P Capital IQ 6373:. Cincinnati, Ohio: 5497: 5254: 5226: 5086: 4915: 4767: 4648: 4575: 4547: 4519: 4504:{\displaystyle s(t)} 4486: 4410: 4404:decays exponentially 4378: 4358: 4327: 4300: 4273: 4246: 4184: 4162: 4071: 3995: 3948: 3870: 3842: 3778: 3731: 3666: 3638: 3584: 3537: 3491: 3463: 3425: 3378: 3356: 3328: 3281: 3254: 3217: 3190: 3163: 3130: 3108:{\displaystyle Nc/4} 3088: 3068: 3064:shown in red, where 3033: 3004:{\displaystyle Nc/4} 2984: 2964: 2944: 2917: 2890: 2863: 2836: 2809: 2779:the "issue premium", 2707:Sabine Oil Gas Corp 2564:Dynegy Holdings, LLC 2487:Ambac Assurance Corp 1517:Collins & Aikman 1503:Collins & Aikman 1380:). During the 2012 1239:reference obligation 830:is an example of an 764:risk management team 400:Law of large numbers 306:, which is known as 75:credit event auction 10891:Business portal 10744:Property derivative 9830:Wall Street Journal 9613:footnote references 9303:Journal of Taxation 9119:, October 22, 2008. 9064:on January 11, 2009 8968:, fincyclopedia.net 8929:, fincyclopedia.net 8831:Watts, William L., 8407:The Financial Times 8097:on December 3, 2009 7925:on January 18, 2017 7913:McDermott, Robert. 7488:on January 18, 2017 7476:McDermott, Robert. 7180:Munchau, Wolfgang. 6679:. Salon Media Group 6607:(2). Archived from 6175:on January 19, 2012 5728:credit spread curve 4515:zero curve at time 4352:credit spread curve 4172:{\displaystyle 0\,} 3366:{\displaystyle 0\,} 3316:Default Payment PV 3313:Premium Payment PV 2674:Residential Cap LLC 2641:ERC Ireland Fin Ltd 2476:Japan Airlines Corp 2278:General Motors LCDS 1885:Republic of Ecuador 1570:Calpine Corporation 1441:credit-fixing event 1363:real estate bubbles 1282:credit event notice 772:overly concentrated 308:physical settlement 124:credit-linked notes 39:credit default swap 10749:Weather derivative 10734:Freight derivative 10716:Exotic derivatives 10636:Commodities future 10323:Intermarket spread 10086:Synthetic position 10014:Derivatives market 9111:Olsen, Kim Asger, 9092:Berkshire Hathaway 8983:The New York Times 8668:on August 29, 2010 8641:The New York Times 8537:The New York Times 7994:on August 17, 2010 6210:IMF Working Papers 5787:Berkshire Hathaway 5689:No-arbitrage model 5673: 5478: 5239: 5202: 5067: 4896: 4748: 4629: 4560: 4525: 4501: 4472: 4393: 4364: 4340: 4313: 4286: 4259: 4242:The probabilities 4227: 4169: 4147: 4051: 3980: 3933: 3855: 3824: 3763: 3716: 3651: 3620: 3569: 3522: 3476: 3445: 3410: 3363: 3341: 3294: 3267: 3236: 3203: 3176: 3149: 3105: 3074: 3054: 3001: 2970: 2950: 2930: 2903: 2876: 2849: 2822: 2575:Seat Pagine Gialle 2465:McCarthy and Stone 2267:General Motors CDS 2036:Smurfit-Stone LCDS 2014:Nortel Corporation 1557:Delphi Corporation 1531:Northwest Airlines 1411:physically settled 1351: 1200:J.P. Morgan losses 1059:In September, the 1025: 1017: 703:insurable interest 551:interest rate swap 404:actuarial analysis 366:insurable interest 67:insurable interest 35: 27: 10899: 10898: 10800:Equity derivative 10790:Credit derivative 10758:Other derivatives 10729:Energy derivative 10691:Perpetual futures 10572:Overnight indexed 10522:Constant maturity 10483: 10482: 10430:Finite difference 10363:Protective option 9795:"The AIG Bailout" 9641: 9640: 9633: 9489:. (archived 2009) 9152:Buffett, Warren. 8912:Oxford University 8401:Van Duyn, Aline. 8329:on August 6, 2010 7750:978-0-349-12189-5 7367:Research Briefing 7226:978-1-60358-205-6 7065:978-0-471-71887-1 6958:on April 29, 2010 6910:on April 14, 2010 6566:on April 16, 2010 6403:on April 29, 2010 5842:Washington Mutual 5686: 5685: 5516: 5215: 5214: 5200: 5020: 4862: 4733: 4528:{\displaystyle t} 4367:{\displaystyle t} 4240: 4239: 4090: 3889: 3685: 3510: 3077:{\displaystyle R} 2973:{\displaystyle c} 2953:{\displaystyle N} 2763:Probability model 2736: 2735: 2696:Radio Shack Corp 2619:Hellenic Republic 2245:Georgia Gulf LCDS 2025:Smurfit-Stone CDS 1732:Washington Mutual 1462:Washington Mutual 1262:calculation agent 1113:Market as of 2009 1006:Market as of 2008 840:capital structure 692: 691: 452:counterparty risk 362:actually suffered 258:credit derivative 10934: 10889: 10888: 10661:Forwards pricing 10435:Garman–Kohlhagen 10036: 10035: 10007: 10000: 9993: 9984: 9983: 9965: 9963: 9961: 9956:on April 6, 2009 9952:. Archived from 9931:Fortune Magazine 9761:. Smartquant.com 9737: 9731: 9726: 9724: 9716: 9714: 9636: 9629: 9625: 9622: 9616: 9584: 9583: 9576: 9566: 9565: 9563: 9561: 9546: 9540: 9539: 9537: 9535: 9521: 9515: 9514: 9512: 9510: 9496: 9490: 9484: 9478: 9477: 9475: 9473: 9468:on June 29, 2010 9458: 9452: 9449: 9443: 9436: 9430: 9427: 9418: 9415: 9409: 9406: 9400: 9397: 9391: 9386: 9377: 9376: 9360: 9354: 9353: 9347: 9342: 9340: 9332: 9330: 9328: 9316: 9307: 9306: 9298: 9289: 9283: 9277: 9276: 9274: 9272: 9256: 9250: 9244: 9238: 9232: 9226: 9225: 9223: 9221: 9215: 9208: 9199: 9193: 9187: 9181: 9175: 9169: 9168: 9166: 9164: 9158: 9149: 9143: 9142: 9140: 9138: 9126: 9120: 9109: 9103: 9102: 9100: 9098: 9089: 9080: 9074: 9073: 9071: 9069: 9054: 9048: 9047: 9045: 9043: 9037: 9026: 9017: 9016: 9014: 9012: 9001: 8995: 8994: 8992: 8990: 8975: 8969: 8963: 8957: 8951: 8942: 8936: 8930: 8924: 8915: 8905: 8899: 8889: 8883: 8882: 8880: 8878: 8864: 8858: 8848: 8842: 8829: 8823: 8822: 8820: 8818: 8803: 8797: 8796: 8794: 8792: 8777: 8768: 8767: 8765: 8763: 8757: 8746: 8740: 8739: 8737: 8735: 8724: 8718: 8717: 8712:. Archived from 8706: 8700: 8699: 8697: 8695: 8684: 8678: 8677: 8675: 8673: 8658: 8652: 8651: 8649: 8647: 8632: 8626: 8625: 8623: 8621: 8606: 8600: 8599: 8597: 8595: 8580: 8574: 8573: 8571: 8569: 8554: 8548: 8547: 8545: 8543: 8528: 8522: 8521: 8509: 8503: 8502: 8500: 8498: 8486: 8480: 8479: 8477: 8475: 8460: 8451: 8450: 8448: 8446: 8440: 8431: 8425: 8424: 8422: 8420: 8414: 8409:. Archived from 8398: 8392: 8391: 8384: 8373: 8372: 8371:on May 28, 2013. 8370: 8364:. Archived from 8359: 8350: 8339: 8338: 8336: 8334: 8318: 8307: 8306: 8304: 8302: 8287: 8281: 8280: 8278: 8276: 8264: 8258: 8257: 8255: 8253: 8237: 8231: 8230: 8228: 8226: 8215: 8209: 8208: 8206: 8204: 8189: 8183: 8182: 8180: 8178: 8172: 8161: 8155: 8154: 8152: 8150: 8138: 8129: 8128: 8126: 8124: 8113: 8107: 8106: 8104: 8102: 8096: 8085: 8077: 8071: 8070: 8068: 8066: 8061:on July 23, 2011 8060: 8045: 8036: 8030: 8029: 8027: 8025: 8010: 8004: 8003: 8001: 7999: 7984: 7978: 7977: 7975: 7973: 7968:on June 23, 2010 7967: 7961:. Archived from 7956: 7947: 7938: 7937: 7932: 7930: 7921:. Archived from 7910: 7904: 7903: 7901: 7899: 7888: 7882: 7881: 7879: 7877: 7862: 7856: 7855: 7843: 7837: 7826: 7817: 7816: 7814: 7812: 7797: 7786: 7785: 7783: 7781: 7766: 7755: 7754: 7738: 7725: 7710: 7709: 7707: 7705: 7700:on July 15, 2011 7699: 7693:. Archived from 7666: 7657: 7648: 7647: 7641: 7636: 7634: 7626: 7598: 7592: 7586: 7580: 7572: 7570: 7569: 7564:on June 26, 2010 7563: 7557:. Archived from 7556: 7548: 7542: 7541: 7536: 7534: 7529:on July 28, 2011 7528: 7513: 7504: 7498: 7497: 7495: 7493: 7484:. Archived from 7473: 7462: 7461: 7459: 7457: 7451: 7439: 7430: 7429: 7427: 7425: 7414: 7408: 7407: 7405: 7403: 7392: 7386: 7385: 7383: 7381: 7376:on July 16, 2011 7375: 7369:. Archived from 7364: 7355: 7349: 7348: 7346: 7344: 7339:. March 17, 2010 7329: 7323: 7322: 7320: 7318: 7303: 7292: 7291: 7289: 7287: 7275: 7266: 7265: 7263: 7261: 7244: 7238: 7237: 7235: 7233: 7210: 7204: 7203: 7201: 7199: 7193: 7188:. Archived from 7177: 7171: 7170: 7168: 7166: 7151: 7140: 7139: 7137: 7135: 7129: 7122: 7113: 7096: 7095: 7093: 7091: 7086:. April 16, 2010 7076: 7070: 7069: 7051: 7042: 7041: 7039: 7037: 7022: 7016: 7015: 7013: 7011: 6996: 6990: 6989: 6987: 6985: 6974: 6968: 6967: 6965: 6963: 6948: 6942: 6941: 6939: 6937: 6926: 6920: 6919: 6917: 6915: 6900: 6894: 6893: 6887: 6879: 6877: 6875: 6869: 6863:. Archived from 6862: 6853: 6842: 6841: 6839: 6837: 6832: 6823: 6817: 6816: 6805: 6799: 6798: 6792: 6790: 6779: 6773: 6772: 6767: 6765: 6754: 6748: 6747: 6742: 6740: 6729: 6723: 6716: 6710: 6695: 6689: 6688: 6686: 6684: 6668: 6647: 6646: 6644: 6642: 6630: 6621: 6620: 6618: 6616: 6611:on July 23, 2011 6601:Financial Update 6592: 6579: 6578: 6573: 6571: 6562:. Archived from 6555: 6546: 6545: 6543: 6541: 6527: 6518: 6493: 6492: 6466: 6457: 6446: 6445: 6443: 6441: 6428: 6419: 6413: 6412: 6410: 6408: 6393: 6387: 6386: 6357: 6342: 6341: 6335: 6327: 6325: 6323: 6312: 6297: 6296: 6294: 6292: 6283: 6274: 6241: 6240: 6238: 6236: 6207: 6198: 6185: 6184: 6182: 6180: 6165: 6159: 6146: 6140: 6139: 6137: 6135: 6130:on March 7, 2012 6129: 6118: 6110: 6097: 6096: 6094: 6092: 6077: 6071: 6070: 6068: 6066: 6054: 6038: 6035: 6029: 6026: 5941:ISDA Definitions 5913:income statement 5840:had bought some 5769:marked-to-market 5682: 5680: 5679: 5674: 5669: 5668: 5659: 5658: 5649: 5648: 5639: 5638: 5629: 5628: 5616: 5615: 5606: 5605: 5596: 5595: 5586: 5585: 5573: 5572: 5563: 5562: 5553: 5552: 5540: 5539: 5530: 5529: 5517: 5512: 5504: 5487: 5485: 5484: 5479: 5474: 5473: 5461: 5460: 5442: 5441: 5432: 5431: 5422: 5421: 5409: 5408: 5396: 5395: 5377: 5376: 5367: 5366: 5354: 5353: 5341: 5340: 5322: 5321: 5309: 5308: 5296: 5295: 5248: 5246: 5245: 5240: 5220: 5219: 5211: 5209: 5208: 5203: 5201: 5196: 5188: 5183: 5182: 5170: 5169: 5157: 5156: 5144: 5143: 5131: 5130: 5121: 5120: 5111: 5110: 5101: 5100: 5076: 5074: 5073: 5068: 5060: 5059: 5047: 5046: 5034: 5033: 5021: 5016: 5008: 5003: 5002: 4969: 4968: 4950: 4949: 4940: 4939: 4930: 4929: 4905: 4903: 4902: 4897: 4889: 4888: 4876: 4875: 4863: 4858: 4850: 4845: 4844: 4811: 4810: 4792: 4791: 4782: 4781: 4757: 4755: 4754: 4749: 4744: 4743: 4734: 4729: 4721: 4716: 4715: 4682: 4681: 4663: 4662: 4638: 4636: 4635: 4630: 4627: 4626: 4596: 4595: 4569: 4567: 4566: 4561: 4541: 4540: 4534: 4532: 4531: 4526: 4510: 4508: 4507: 4502: 4481: 4479: 4478: 4473: 4453: 4402: 4400: 4399: 4394: 4373: 4371: 4370: 4365: 4349: 4347: 4346: 4341: 4339: 4338: 4322: 4320: 4319: 4314: 4312: 4311: 4295: 4293: 4292: 4287: 4285: 4284: 4268: 4266: 4265: 4260: 4258: 4257: 4236: 4234: 4233: 4228: 4226: 4225: 4216: 4215: 4206: 4205: 4196: 4195: 4178: 4176: 4175: 4170: 4156: 4154: 4153: 4148: 4143: 4142: 4130: 4129: 4117: 4116: 4104: 4103: 4091: 4086: 4078: 4060: 4058: 4057: 4052: 4046: 4045: 4027: 4026: 4017: 4016: 4007: 4006: 3989: 3987: 3986: 3981: 3978: 3977: 3942: 3940: 3939: 3934: 3929: 3928: 3916: 3915: 3903: 3902: 3890: 3885: 3877: 3864: 3862: 3861: 3856: 3854: 3853: 3838:Default at time 3833: 3831: 3830: 3825: 3819: 3818: 3800: 3799: 3790: 3789: 3772: 3770: 3769: 3764: 3761: 3760: 3725: 3723: 3722: 3717: 3712: 3711: 3699: 3698: 3686: 3681: 3673: 3660: 3658: 3657: 3652: 3650: 3649: 3634:Default at time 3629: 3627: 3626: 3621: 3615: 3614: 3596: 3595: 3578: 3576: 3575: 3570: 3567: 3566: 3531: 3529: 3528: 3523: 3521: 3520: 3511: 3506: 3498: 3485: 3483: 3482: 3477: 3475: 3474: 3459:Default at time 3454: 3452: 3451: 3446: 3443: 3442: 3419: 3417: 3416: 3411: 3408: 3407: 3372: 3370: 3369: 3364: 3350: 3348: 3347: 3342: 3340: 3339: 3324:Default at time 3307: 3306: 3303: 3301: 3300: 3295: 3293: 3292: 3276: 3274: 3273: 3268: 3266: 3265: 3245: 3243: 3242: 3237: 3235: 3234: 3212: 3210: 3209: 3204: 3202: 3201: 3185: 3183: 3182: 3177: 3175: 3174: 3158: 3156: 3155: 3150: 3148: 3147: 3123: 3114: 3112: 3111: 3106: 3101: 3083: 3081: 3080: 3075: 3063: 3061: 3060: 3055: 3010: 3008: 3007: 3002: 2997: 2979: 2977: 2976: 2971: 2959: 2957: 2956: 2951: 2939: 2937: 2936: 2931: 2929: 2928: 2912: 2910: 2909: 2904: 2902: 2901: 2885: 2883: 2882: 2877: 2875: 2874: 2858: 2856: 2855: 2850: 2848: 2847: 2831: 2829: 2828: 2823: 2821: 2820: 2773:drug development 2652:Sino Forest Corp 2608:Eastman Kodak Co 2542:Anglo Irish Bank 1482: 1481: 1445:investment banks 1405:Physical or cash 1301:investment grade 1235:reference entity 1155:Banque de France 1150:75 billion 1084:over the counter 923:punitive damages 856:Leveraged buyout 687: 684: 678: 666: 665: 658: 570:event of default 428:Hedge accounting 415:income statement 247:credit insurance 215: 169: 10942: 10941: 10937: 10936: 10935: 10933: 10932: 10931: 10917:Swaps (finance) 10902: 10901: 10900: 10895: 10883: 10875: 10861:Great Recession 10856:Government debt 10834: 10810:Fund derivative 10753: 10710: 10671:Futures pricing 10646:Dividend future 10641:Currency future 10624: 10606: 10479: 10455:Put–call parity 10391: 10378:Vertical spread 10313:Diagonal spread 10283:Calendar spread 10254: 10163: 10100: 10025: 10016: 10011: 9959: 9957: 9950:Financial Times 9891:Financial Times 9861:March 17, 2008 9841:Financial Times 9810: 9729: 9727: 9718: 9717: 9712:10.1.1.139.4044 9699:Duffie, Darrell 9691:Financial Times 9637: 9626: 9620: 9617: 9598: 9589:This article's 9585: 9581: 9574: 9569: 9559: 9557: 9556:. June 30, 2014 9548: 9547: 9543: 9533: 9531: 9523: 9522: 9518: 9508: 9506: 9498: 9497: 9493: 9485: 9481: 9471: 9469: 9460: 9459: 9455: 9450: 9446: 9437: 9433: 9428: 9421: 9416: 9412: 9407: 9403: 9398: 9394: 9387: 9380: 9361: 9357: 9345: 9343: 9334: 9333: 9326: 9324: 9317: 9310: 9299: 9292: 9284: 9280: 9270: 9268: 9257: 9253: 9245: 9241: 9233: 9229: 9219: 9217: 9213: 9206: 9200: 9196: 9188: 9184: 9176: 9172: 9162: 9160: 9156: 9150: 9146: 9136: 9134: 9127: 9123: 9110: 9106: 9096: 9094: 9087: 9081: 9077: 9067: 9065: 9056: 9055: 9051: 9041: 9039: 9028: 9027: 9020: 9010: 9008: 9003: 9002: 8998: 8988: 8986: 8985:. June 23, 2009 8977: 8976: 8972: 8964: 8960: 8952: 8945: 8937: 8933: 8925: 8918: 8906: 8902: 8890: 8886: 8876: 8874: 8866: 8865: 8861: 8849: 8845: 8830: 8826: 8816: 8814: 8804: 8800: 8790: 8788: 8779: 8778: 8771: 8761: 8759: 8748: 8747: 8743: 8733: 8731: 8726: 8725: 8721: 8708: 8707: 8703: 8693: 8691: 8686: 8685: 8681: 8671: 8669: 8660: 8659: 8655: 8645: 8643: 8633: 8629: 8619: 8617: 8608: 8607: 8603: 8593: 8591: 8581: 8577: 8567: 8565: 8555: 8551: 8541: 8539: 8529: 8525: 8510: 8506: 8496: 8494: 8487: 8483: 8473: 8471: 8462: 8461: 8454: 8444: 8442: 8438: 8432: 8428: 8418: 8416: 8399: 8395: 8386: 8385: 8376: 8368: 8357: 8351: 8342: 8332: 8330: 8319: 8310: 8300: 8298: 8289: 8288: 8284: 8274: 8272: 8265: 8261: 8251: 8249: 8238: 8234: 8224: 8222: 8217: 8216: 8212: 8202: 8200: 8190: 8186: 8176: 8174: 8163: 8162: 8158: 8148: 8146: 8145:. CNN / Fortune 8139: 8132: 8122: 8120: 8117:"Default Rates" 8115: 8114: 8110: 8100: 8098: 8094: 8083: 8079: 8078: 8074: 8064: 8062: 8058: 8043: 8039:Weithers, Tim. 8037: 8033: 8023: 8021: 8011: 8007: 7997: 7995: 7986: 7985: 7981: 7971: 7969: 7965: 7954: 7948: 7941: 7928: 7926: 7911: 7907: 7897: 7895: 7890: 7889: 7885: 7875: 7873: 7863: 7859: 7844: 7840: 7834:Financial Times 7828:Tett, Gillian. 7827: 7820: 7810: 7808: 7798: 7789: 7779: 7777: 7767: 7758: 7751: 7726: 7713: 7703: 7701: 7697: 7664: 7658: 7651: 7639: 7637: 7628: 7627: 7599: 7595: 7574: 7573: 7567: 7565: 7561: 7554: 7552:"Archived copy" 7550: 7549: 7545: 7532: 7530: 7526: 7511: 7505: 7501: 7491: 7489: 7474: 7465: 7455: 7453: 7452:on May 27, 2010 7449: 7441: 7440: 7433: 7423: 7421: 7418:"Bill H.R. 977" 7416: 7415: 7411: 7401: 7399: 7394: 7393: 7389: 7379: 7377: 7373: 7362: 7360:"Short Selling" 7356: 7352: 7342: 7340: 7331: 7330: 7326: 7316: 7314: 7312:Huffington Post 7304: 7295: 7285: 7283: 7276: 7269: 7259: 7257: 7245: 7241: 7231: 7229: 7227: 7211: 7207: 7197: 7195: 7186:Financial Times 7178: 7174: 7164: 7162: 7160:Financial Times 7152: 7143: 7133: 7131: 7127: 7120: 7114: 7099: 7089: 7087: 7078: 7077: 7073: 7066: 7052: 7045: 7035: 7033: 7024: 7023: 7019: 7009: 7007: 6998: 6997: 6993: 6983: 6981: 6976: 6975: 6971: 6961: 6959: 6950: 6949: 6945: 6935: 6933: 6928: 6927: 6923: 6913: 6911: 6902: 6901: 6897: 6881: 6880: 6873: 6871: 6870:on May 27, 2010 6867: 6860: 6854: 6845: 6835: 6833: 6830: 6824: 6820: 6807: 6806: 6802: 6788: 6786: 6780: 6776: 6763: 6761: 6755: 6751: 6738: 6736: 6730: 6726: 6717: 6713: 6696: 6692: 6682: 6680: 6669: 6650: 6640: 6638: 6631: 6624: 6614: 6612: 6593: 6582: 6569: 6567: 6556: 6549: 6539: 6537: 6525: 6521:Mengle, David. 6519: 6496: 6464: 6458: 6449: 6439: 6437: 6426: 6420: 6416: 6406: 6404: 6395: 6394: 6390: 6358: 6345: 6329: 6328: 6321: 6319: 6313: 6300: 6290: 6288: 6281: 6275: 6244: 6234: 6232: 6205: 6199: 6188: 6178: 6176: 6167: 6166: 6162: 6156:Wayback Machine 6147: 6143: 6133: 6131: 6127: 6116: 6112: 6111: 6100: 6090: 6088: 6078: 6074: 6064: 6062: 6055: 6051: 6047: 6042: 6041: 6036: 6032: 6027: 6023: 6018: 5952: 5943: 5926: 5878: 5873: 5823: 5736: 5712: 5691: 5664: 5660: 5654: 5650: 5644: 5640: 5634: 5630: 5624: 5620: 5611: 5607: 5601: 5597: 5591: 5587: 5581: 5577: 5568: 5564: 5558: 5554: 5548: 5544: 5535: 5531: 5525: 5521: 5505: 5503: 5498: 5495: 5494: 5469: 5465: 5456: 5452: 5437: 5433: 5427: 5423: 5417: 5413: 5404: 5400: 5391: 5387: 5372: 5368: 5362: 5358: 5349: 5345: 5336: 5332: 5317: 5313: 5304: 5300: 5291: 5287: 5255: 5252: 5251: 5227: 5224: 5223: 5189: 5187: 5178: 5174: 5165: 5161: 5152: 5148: 5139: 5135: 5126: 5122: 5116: 5112: 5106: 5102: 5096: 5092: 5087: 5084: 5083: 5055: 5051: 5042: 5038: 5029: 5025: 5009: 5007: 4998: 4994: 4964: 4960: 4945: 4941: 4935: 4931: 4925: 4921: 4916: 4913: 4912: 4884: 4880: 4871: 4867: 4851: 4849: 4840: 4836: 4806: 4802: 4787: 4783: 4777: 4773: 4768: 4765: 4764: 4739: 4735: 4722: 4720: 4711: 4707: 4677: 4673: 4658: 4654: 4649: 4646: 4645: 4622: 4618: 4591: 4587: 4576: 4573: 4572: 4548: 4545: 4544: 4520: 4517: 4516: 4487: 4484: 4483: 4449: 4411: 4408: 4407: 4379: 4376: 4375: 4359: 4356: 4355: 4334: 4330: 4328: 4325: 4324: 4307: 4303: 4301: 4298: 4297: 4280: 4276: 4274: 4271: 4270: 4253: 4249: 4247: 4244: 4243: 4221: 4217: 4211: 4207: 4201: 4197: 4191: 4187: 4185: 4182: 4181: 4163: 4160: 4159: 4138: 4134: 4125: 4121: 4112: 4108: 4099: 4095: 4079: 4077: 4072: 4069: 4068: 4041: 4037: 4022: 4018: 4012: 4008: 4002: 3998: 3996: 3993: 3992: 3973: 3969: 3949: 3946: 3945: 3924: 3920: 3911: 3907: 3898: 3894: 3878: 3876: 3871: 3868: 3867: 3849: 3845: 3843: 3840: 3839: 3814: 3810: 3795: 3791: 3785: 3781: 3779: 3776: 3775: 3756: 3752: 3732: 3729: 3728: 3707: 3703: 3694: 3690: 3674: 3672: 3667: 3664: 3663: 3645: 3641: 3639: 3636: 3635: 3610: 3606: 3591: 3587: 3585: 3582: 3581: 3562: 3558: 3538: 3535: 3534: 3516: 3512: 3499: 3497: 3492: 3489: 3488: 3470: 3466: 3464: 3461: 3460: 3438: 3434: 3426: 3423: 3422: 3403: 3399: 3379: 3376: 3375: 3357: 3354: 3353: 3335: 3331: 3329: 3326: 3325: 3288: 3284: 3282: 3279: 3278: 3261: 3257: 3255: 3252: 3251: 3248:discount factor 3230: 3226: 3218: 3215: 3214: 3197: 3193: 3191: 3188: 3187: 3170: 3166: 3164: 3161: 3160: 3137: 3133: 3131: 3128: 3127: 3097: 3089: 3086: 3085: 3069: 3066: 3065: 3034: 3031: 3030: 2993: 2985: 2982: 2981: 2965: 2962: 2961: 2945: 2942: 2941: 2924: 2920: 2918: 2915: 2914: 2897: 2893: 2891: 2888: 2887: 2870: 2866: 2864: 2861: 2860: 2843: 2839: 2837: 2834: 2833: 2816: 2812: 2810: 2807: 2806: 2765: 2741: 2069:Station Casinos 1843:Hawaiian Telcom 1719:Lehman Brothers 1544:Delta Air Lines 1458:Lehman Brothers 1437: 1407: 1402: 1367:Great Recession 1342: 1336: 1247:government bond 1223: 1202: 1189: 1163: 1115: 1034: 1008: 979: 961:(SEC) and the 903: 898: 825: 789:notional amount 745: 688: 682: 679: 676: 667: 663: 656: 575:For example, a 542: 522: 503: 448: 355: 327:notional amount 319:cash settlement 227: 226: 225: 224: 223: 221: 216: 207: 206: 205: 203: 199: 195: 191: 187: 183: 179: 175: 170: 159: 112: 83: 17: 12: 11: 5: 10940: 10930: 10929: 10924: 10919: 10914: 10897: 10896: 10894: 10893: 10880: 10877: 10876: 10874: 10873: 10868: 10866:Municipal debt 10863: 10858: 10853: 10851:Corporate debt 10848: 10842: 10840: 10836: 10835: 10833: 10832: 10827: 10822: 10817: 10812: 10807: 10802: 10797: 10792: 10787: 10782: 10777: 10772: 10767: 10761: 10759: 10755: 10754: 10752: 10751: 10746: 10741: 10736: 10731: 10726: 10720: 10718: 10712: 10711: 10709: 10708: 10703: 10698: 10693: 10688: 10683: 10678: 10673: 10668: 10663: 10658: 10653: 10651:Forward market 10648: 10643: 10638: 10633: 10627: 10625: 10623: 10622: 10617: 10611: 10608: 10607: 10605: 10604: 10599: 10594: 10589: 10584: 10579: 10574: 10569: 10564: 10559: 10554: 10549: 10544: 10539: 10534: 10532:Credit default 10529: 10524: 10519: 10514: 10509: 10504: 10499: 10493: 10491: 10485: 10484: 10481: 10480: 10478: 10477: 10472: 10467: 10462: 10457: 10452: 10447: 10442: 10437: 10432: 10427: 10417: 10412: 10407: 10401: 10399: 10393: 10392: 10390: 10389: 10375: 10370: 10365: 10360: 10355: 10350: 10345: 10340: 10335: 10330: 10328:Iron butterfly 10325: 10320: 10315: 10310: 10305: 10300: 10298:Covered option 10295: 10290: 10285: 10280: 10275: 10270: 10264: 10262: 10256: 10255: 10253: 10252: 10247: 10242: 10237: 10236:Mountain range 10234: 10229: 10224: 10219: 10214: 10209: 10204: 10199: 10194: 10189: 10184: 10179: 10173: 10171: 10165: 10164: 10162: 10161: 10156: 10151: 10146: 10141: 10136: 10131: 10126: 10121: 10116: 10110: 10108: 10102: 10101: 10099: 10098: 10093: 10088: 10083: 10078: 10073: 10068: 10063: 10058: 10053: 10048: 10042: 10040: 10033: 10027: 10026: 10021: 10018: 10017: 10010: 10009: 10002: 9995: 9987: 9981: 9980: 9973: 9966: 9941: 9927: 9920:New York Times 9916: 9909: 9902:New York Times 9898: 9887: 9880: 9873:New York Times 9869: 9859: 9852:New York Times 9848: 9837: 9826: 9820: 9809: 9806: 9805: 9804: 9798: 9792: 9782: 9773: 9767: 9762: 9756: 9738: 9730:|journal= 9695: 9683: 9677: 9667: 9661: 9652: 9647: 9639: 9638: 9593:external links 9588: 9586: 9579: 9573: 9572:External links 9570: 9568: 9567: 9541: 9516: 9491: 9479: 9453: 9444: 9431: 9419: 9410: 9401: 9392: 9378: 9355: 9346:|journal= 9308: 9290: 9278: 9251: 9239: 9227: 9194: 9182: 9170: 9144: 9121: 9104: 9075: 9049: 9018: 8996: 8970: 8958: 8943: 8931: 8916: 8900: 8884: 8859: 8843: 8824: 8798: 8769: 8741: 8719: 8701: 8679: 8653: 8627: 8616:. May 15, 2012 8614:Democracy Now! 8601: 8589:Financial News 8575: 8549: 8523: 8504: 8481: 8452: 8426: 8393: 8374: 8340: 8308: 8282: 8259: 8232: 8210: 8184: 8156: 8130: 8108: 8072: 8031: 8019:New York Times 8005: 7979: 7939: 7905: 7883: 7857: 7838: 7818: 7787: 7756: 7749: 7743:–67, 87, 303. 7711: 7649: 7640:|journal= 7593: 7543: 7499: 7463: 7431: 7409: 7387: 7350: 7337:New York Times 7324: 7293: 7267: 7239: 7225: 7205: 7172: 7141: 7097: 7071: 7064: 7043: 7017: 6991: 6969: 6943: 6921: 6895: 6843: 6818: 6813:chicagofed.org 6800: 6774: 6749: 6724: 6711: 6690: 6648: 6622: 6580: 6547: 6494: 6447: 6431:newyorkfed.org 6414: 6388: 6361:Partnoy, Frank 6343: 6298: 6242: 6186: 6160: 6141: 6098: 6072: 6048: 6046: 6043: 6040: 6039: 6030: 6020: 6019: 6017: 6014: 6013: 6012: 6007: 6005:Toxic security 6002: 5997: 5992: 5979: 5973: 5968: 5963: 5958: 5951: 5948: 5942: 5939: 5925: 5922: 5908:mark to market 5877: 5874: 5822: 5819: 5783:Warren Buffett 5735: 5732: 5711: 5708: 5699:risk free rate 5690: 5687: 5684: 5683: 5672: 5667: 5663: 5657: 5653: 5647: 5643: 5637: 5633: 5627: 5623: 5619: 5614: 5610: 5604: 5600: 5594: 5590: 5584: 5580: 5576: 5571: 5567: 5561: 5557: 5551: 5547: 5543: 5538: 5534: 5528: 5524: 5520: 5515: 5511: 5508: 5502: 5492: 5489: 5488: 5477: 5472: 5468: 5464: 5459: 5455: 5451: 5448: 5445: 5440: 5436: 5430: 5426: 5420: 5416: 5412: 5407: 5403: 5399: 5394: 5390: 5386: 5383: 5380: 5375: 5371: 5365: 5361: 5357: 5352: 5348: 5344: 5339: 5335: 5331: 5328: 5325: 5320: 5316: 5312: 5307: 5303: 5299: 5294: 5290: 5286: 5283: 5280: 5277: 5274: 5271: 5268: 5265: 5262: 5259: 5249: 5237: 5234: 5231: 5213: 5212: 5199: 5195: 5192: 5186: 5181: 5177: 5173: 5168: 5164: 5160: 5155: 5151: 5147: 5142: 5138: 5134: 5129: 5125: 5119: 5115: 5109: 5105: 5099: 5095: 5091: 5081: 5078: 5077: 5066: 5063: 5058: 5054: 5050: 5045: 5041: 5037: 5032: 5028: 5024: 5019: 5015: 5012: 5006: 5001: 4997: 4993: 4990: 4987: 4984: 4981: 4978: 4975: 4972: 4967: 4963: 4959: 4956: 4953: 4948: 4944: 4938: 4934: 4928: 4924: 4920: 4910: 4907: 4906: 4895: 4892: 4887: 4883: 4879: 4874: 4870: 4866: 4861: 4857: 4854: 4848: 4843: 4839: 4835: 4832: 4829: 4826: 4823: 4820: 4817: 4814: 4809: 4805: 4801: 4798: 4795: 4790: 4786: 4780: 4776: 4772: 4762: 4759: 4758: 4747: 4742: 4738: 4732: 4728: 4725: 4719: 4714: 4710: 4706: 4703: 4700: 4697: 4694: 4691: 4688: 4685: 4680: 4676: 4672: 4669: 4666: 4661: 4657: 4653: 4643: 4640: 4639: 4625: 4621: 4617: 4614: 4611: 4608: 4605: 4602: 4599: 4594: 4590: 4586: 4583: 4580: 4570: 4558: 4555: 4552: 4524: 4500: 4497: 4494: 4491: 4471: 4468: 4465: 4462: 4459: 4456: 4452: 4448: 4445: 4442: 4439: 4436: 4433: 4430: 4427: 4424: 4421: 4418: 4415: 4392: 4389: 4386: 4383: 4363: 4337: 4333: 4310: 4306: 4283: 4279: 4256: 4252: 4238: 4237: 4224: 4220: 4214: 4210: 4204: 4200: 4194: 4190: 4179: 4167: 4157: 4146: 4141: 4137: 4133: 4128: 4124: 4120: 4115: 4111: 4107: 4102: 4098: 4094: 4089: 4085: 4082: 4076: 4066: 4062: 4061: 4049: 4044: 4040: 4036: 4033: 4030: 4025: 4021: 4015: 4011: 4005: 4001: 3990: 3976: 3972: 3968: 3965: 3962: 3959: 3956: 3953: 3943: 3932: 3927: 3923: 3919: 3914: 3910: 3906: 3901: 3897: 3893: 3888: 3884: 3881: 3875: 3865: 3852: 3848: 3835: 3834: 3822: 3817: 3813: 3809: 3806: 3803: 3798: 3794: 3788: 3784: 3773: 3759: 3755: 3751: 3748: 3745: 3742: 3739: 3736: 3726: 3715: 3710: 3706: 3702: 3697: 3693: 3689: 3684: 3680: 3677: 3671: 3661: 3648: 3644: 3631: 3630: 3618: 3613: 3609: 3605: 3602: 3599: 3594: 3590: 3579: 3565: 3561: 3557: 3554: 3551: 3548: 3545: 3542: 3532: 3519: 3515: 3509: 3505: 3502: 3496: 3486: 3473: 3469: 3456: 3455: 3441: 3437: 3433: 3430: 3420: 3406: 3402: 3398: 3395: 3392: 3389: 3386: 3383: 3373: 3361: 3351: 3338: 3334: 3321: 3320: 3317: 3314: 3311: 3291: 3287: 3264: 3260: 3233: 3229: 3225: 3222: 3200: 3196: 3173: 3169: 3146: 3143: 3140: 3136: 3104: 3100: 3096: 3093: 3073: 3053: 3050: 3047: 3044: 3041: 3038: 3020: 3019: 3016: 3000: 2996: 2992: 2989: 2969: 2949: 2927: 2923: 2900: 2896: 2873: 2869: 2846: 2842: 2819: 2815: 2794: 2793: 2786: 2783: 2780: 2764: 2761: 2751:, but also by 2749:Darrell Duffie 2740: 2737: 2734: 2733: 2730: 2727: 2723: 2722: 2719: 2716: 2712: 2711: 2708: 2705: 2701: 2700: 2697: 2694: 2690: 2689: 2686: 2683: 2679: 2678: 2675: 2672: 2668: 2667: 2664: 2661: 2657: 2656: 2653: 2650: 2646: 2645: 2642: 2639: 2635: 2634: 2631: 2628: 2624: 2623: 2620: 2617: 2613: 2612: 2609: 2606: 2602: 2601: 2598: 2595: 2591: 2590: 2587: 2584: 2580: 2579: 2576: 2573: 2569: 2568: 2565: 2562: 2558: 2557: 2554: 2551: 2547: 2546: 2543: 2540: 2536: 2535: 2532: 2529: 2525: 2524: 2521: 2518: 2514: 2513: 2510: 2507: 2503: 2502: 2499: 2496: 2492: 2491: 2488: 2485: 2481: 2480: 2477: 2474: 2470: 2469: 2466: 2463: 2459: 2458: 2455: 2452: 2448: 2447: 2444: 2441: 2437: 2436: 2433: 2430: 2426: 2425: 2422: 2419: 2415: 2414: 2411: 2408: 2404: 2403: 2400: 2397: 2393: 2392: 2389: 2388:CIT Group Inc. 2386: 2382: 2381: 2378: 2375: 2371: 2370: 2367: 2364: 2360: 2359: 2356: 2353: 2349: 2348: 2345: 2344:Six Flags LCDS 2342: 2338: 2337: 2334: 2331: 2327: 2326: 2323: 2320: 2316: 2315: 2312: 2309: 2305: 2304: 2301: 2298: 2294: 2293: 2290: 2287: 2283: 2282: 2279: 2276: 2272: 2271: 2268: 2265: 2261: 2260: 2257: 2254: 2250: 2249: 2246: 2243: 2239: 2238: 2235: 2232: 2228: 2227: 2224: 2221: 2217: 2216: 2213: 2210: 2206: 2205: 2202: 2199: 2195: 2194: 2191: 2188: 2184: 2183: 2180: 2177: 2173: 2172: 2169: 2166: 2162: 2161: 2158: 2155: 2151: 2150: 2147: 2144: 2140: 2139: 2136: 2133: 2129: 2128: 2125: 2122: 2118: 2117: 2114: 2113:LyondellBasell 2111: 2107: 2106: 2103: 2100: 2096: 2095: 2092: 2089: 2085: 2084: 2081: 2078: 2074: 2073: 2070: 2067: 2063: 2062: 2059: 2056: 2052: 2051: 2048: 2045: 2041: 2040: 2037: 2034: 2030: 2029: 2026: 2023: 2019: 2018: 2015: 2012: 2008: 2007: 2004: 2001: 1997: 1996: 1993: 1987: 1983: 1982: 1979: 1973: 1969: 1968: 1965: 1959: 1955: 1954: 1951: 1945: 1941: 1940: 1937: 1934: 1930: 1929: 1926: 1920: 1916: 1915: 1912: 1906: 1902: 1901: 1898: 1895: 1891: 1890: 1887: 1882: 1878: 1877: 1874: 1868: 1864: 1863: 1860: 1854: 1850: 1849: 1846: 1840: 1836: 1835: 1832: 1826: 1822: 1821: 1818: 1817:- Subordinated 1812: 1808: 1807: 1804: 1798: 1794: 1793: 1790: 1789:- Subordinated 1784: 1780: 1779: 1776: 1770: 1766: 1765: 1762: 1761:- Subordinated 1756: 1752: 1751: 1748: 1742: 1738: 1737: 1734: 1729: 1725: 1724: 1721: 1716: 1712: 1711: 1708: 1707:- Subordinated 1702: 1698: 1697: 1694: 1688: 1684: 1683: 1680: 1679:- Subordinated 1674: 1670: 1669: 1666: 1660: 1656: 1655: 1652: 1647: 1643: 1642: 1639: 1637:Quebecor World 1634: 1630: 1629: 1626: 1621: 1617: 1616: 1613: 1612:- Subordinated 1607: 1603: 1602: 1599: 1593: 1589: 1588: 1585: 1580: 1576: 1575: 1572: 1567: 1563: 1562: 1559: 1554: 1550: 1549: 1546: 1541: 1537: 1536: 1533: 1528: 1524: 1523: 1520: 1519:- Subordinated 1514: 1510: 1509: 1506: 1500: 1496: 1495: 1489: 1486: 1464:. Commentator 1436: 1433: 1428: 1427: 1423: 1406: 1403: 1401: 1398: 1338:Main article: 1335: 1332: 1297:failure to pay 1251:effective date 1243:corporate bond 1222: 1219: 1208:, a trader at 1201: 1198: 1188: 1185: 1162: 1159: 1114: 1111: 1107:CME Group Inc. 1080:clearing house 1052:rather than a 1033: 1030: 1007: 1004: 978: 975: 971:Enron loophole 955:S&L crisis 915:Blythe Masters 913:and economist 902: 899: 897: 894: 881: 880: 877: 874: 871: 824: 821: 810: 809: 801: 744: 741: 690: 689: 670: 668: 661: 655: 652: 627: 626: 611: 591: 590: 586: 541: 538: 521: 518: 502: 499: 479:liquidity risk 472:clearing house 468: 467: 463: 460:double default 447: 444: 443: 442: 439: 425: 411:mark-to-market 407: 392: 384: 380: 354: 351: 323: 322: 311: 262:counterparties 219: 217: 210: 209: 208: 201: 197: 193: 189: 185: 181: 177: 173: 171: 164: 163: 162: 161: 160: 158: 155: 111: 108: 104:notional value 82: 79: 47:financial swap 15: 9: 6: 4: 3: 2: 10939: 10928: 10925: 10923: 10922:Systemic risk 10920: 10918: 10915: 10913: 10910: 10909: 10907: 10892: 10887: 10882: 10881: 10878: 10872: 10869: 10867: 10864: 10862: 10859: 10857: 10854: 10852: 10849: 10847: 10846:Consumer debt 10844: 10843: 10841: 10839:Market issues 10837: 10831: 10828: 10826: 10823: 10821: 10818: 10816: 10815:Fund of funds 10813: 10811: 10808: 10806: 10803: 10801: 10798: 10796: 10793: 10791: 10788: 10786: 10783: 10781: 10778: 10776: 10773: 10771: 10768: 10766: 10763: 10762: 10760: 10756: 10750: 10747: 10745: 10742: 10740: 10737: 10735: 10732: 10730: 10727: 10725: 10722: 10721: 10719: 10717: 10713: 10707: 10704: 10702: 10699: 10697: 10694: 10692: 10689: 10687: 10684: 10682: 10679: 10677: 10674: 10672: 10669: 10667: 10664: 10662: 10659: 10657: 10656:Forward price 10654: 10652: 10649: 10647: 10644: 10642: 10639: 10637: 10634: 10632: 10629: 10628: 10626: 10621: 10618: 10616: 10613: 10612: 10609: 10603: 10600: 10598: 10595: 10593: 10590: 10588: 10585: 10583: 10580: 10578: 10575: 10573: 10570: 10568: 10567:Interest rate 10565: 10563: 10560: 10558: 10555: 10553: 10550: 10548: 10545: 10543: 10540: 10538: 10535: 10533: 10530: 10528: 10525: 10523: 10520: 10518: 10515: 10513: 10510: 10508: 10505: 10503: 10500: 10498: 10495: 10494: 10492: 10490: 10486: 10476: 10473: 10471: 10468: 10466: 10463: 10461: 10460:MC Simulation 10458: 10456: 10453: 10451: 10448: 10446: 10443: 10441: 10438: 10436: 10433: 10431: 10428: 10425: 10421: 10420:Black–Scholes 10418: 10416: 10413: 10411: 10408: 10406: 10403: 10402: 10400: 10398: 10394: 10387: 10383: 10379: 10376: 10374: 10373:Risk reversal 10371: 10369: 10366: 10364: 10361: 10359: 10356: 10354: 10351: 10349: 10346: 10344: 10341: 10339: 10336: 10334: 10331: 10329: 10326: 10324: 10321: 10319: 10316: 10314: 10311: 10309: 10306: 10304: 10303:Credit spread 10301: 10299: 10296: 10294: 10291: 10289: 10286: 10284: 10281: 10279: 10276: 10274: 10271: 10269: 10266: 10265: 10263: 10261: 10257: 10251: 10248: 10246: 10243: 10241: 10238: 10235: 10233: 10230: 10228: 10227:Interest rate 10225: 10223: 10222:Forward start 10220: 10218: 10215: 10213: 10210: 10208: 10205: 10203: 10200: 10198: 10195: 10193: 10190: 10188: 10185: 10183: 10180: 10178: 10175: 10174: 10172: 10170: 10166: 10160: 10157: 10155: 10152: 10150: 10149:Option styles 10147: 10145: 10142: 10140: 10137: 10135: 10132: 10130: 10127: 10125: 10122: 10120: 10117: 10115: 10112: 10111: 10109: 10107: 10103: 10097: 10094: 10092: 10089: 10087: 10084: 10082: 10079: 10077: 10074: 10072: 10069: 10067: 10066:Open interest 10064: 10062: 10059: 10057: 10054: 10052: 10049: 10047: 10046:Delta neutral 10044: 10043: 10041: 10037: 10034: 10032: 10028: 10024: 10019: 10015: 10008: 10003: 10001: 9996: 9994: 9989: 9988: 9985: 9978: 9974: 9971: 9967: 9955: 9951: 9947: 9942: 9940: 9936: 9932: 9928: 9925: 9921: 9917: 9914: 9910: 9907: 9903: 9899: 9896: 9892: 9888: 9885: 9881: 9878: 9874: 9870: 9868: 9864: 9860: 9857: 9853: 9849: 9846: 9842: 9838: 9835: 9831: 9827: 9825: 9821: 9819: 9816: 9812: 9811: 9803: 9799: 9796: 9793: 9790: 9786: 9783: 9781: 9777: 9774: 9771: 9768: 9766: 9763: 9760: 9757: 9754: 9750: 9746: 9742: 9739: 9735: 9722: 9713: 9708: 9704: 9700: 9696: 9693: 9692: 9687: 9684: 9681: 9678: 9675: 9671: 9668: 9665: 9662: 9660: 9656: 9653: 9651: 9648: 9646: 9643: 9642: 9635: 9632: 9624: 9614: 9610: 9609:inappropriate 9606: 9602: 9596: 9594: 9587: 9578: 9577: 9560:September 13, 9555: 9551: 9545: 9534:September 13, 9530: 9526: 9520: 9509:September 13, 9505: 9501: 9495: 9488: 9483: 9467: 9463: 9457: 9448: 9441: 9435: 9426: 9424: 9414: 9405: 9396: 9390: 9385: 9383: 9374: 9370: 9366: 9359: 9351: 9338: 9322: 9315: 9313: 9304: 9297: 9295: 9287: 9282: 9266: 9262: 9255: 9248: 9243: 9236: 9231: 9212: 9205: 9198: 9191: 9186: 9179: 9174: 9155: 9148: 9132: 9125: 9118: 9114: 9108: 9097:September 21, 9093: 9086: 9079: 9063: 9059: 9058:"Daily Brief" 9053: 9036: 9031: 9025: 9023: 9006: 9000: 8984: 8980: 8974: 8967: 8962: 8955: 8950: 8948: 8940: 8935: 8928: 8923: 8921: 8913: 8909: 8904: 8897: 8893: 8888: 8873: 8869: 8863: 8856: 8852: 8847: 8840: 8839: 8834: 8828: 8813: 8812:Seeking Alpha 8809: 8802: 8786: 8782: 8776: 8774: 8756: 8751: 8745: 8729: 8723: 8715: 8711: 8705: 8689: 8683: 8667: 8663: 8657: 8642: 8638: 8631: 8615: 8611: 8605: 8590: 8586: 8579: 8564: 8560: 8553: 8538: 8534: 8527: 8519: 8515: 8508: 8492: 8485: 8469: 8465: 8459: 8457: 8437: 8430: 8413: 8408: 8404: 8397: 8389: 8383: 8381: 8379: 8367: 8363: 8356: 8349: 8347: 8345: 8328: 8324: 8317: 8315: 8313: 8296: 8292: 8286: 8270: 8263: 8247: 8243: 8236: 8220: 8214: 8199: 8195: 8188: 8171: 8166: 8160: 8144: 8137: 8135: 8119:. Efalken.com 8118: 8112: 8093: 8089: 8082: 8076: 8057: 8053: 8049: 8042: 8035: 8020: 8016: 8009: 7993: 7989: 7983: 7964: 7960: 7953: 7946: 7944: 7936: 7924: 7920: 7916: 7909: 7893: 7887: 7872: 7868: 7861: 7853: 7849: 7842: 7835: 7831: 7825: 7823: 7807: 7803: 7796: 7794: 7792: 7776: 7772: 7765: 7763: 7761: 7752: 7746: 7742: 7737: 7736: 7730: 7729:Tett, Gillian 7724: 7722: 7720: 7718: 7716: 7696: 7692: 7688: 7684: 7680: 7676: 7672: 7671: 7663: 7656: 7654: 7645: 7632: 7624: 7620: 7616: 7612: 7608: 7604: 7597: 7590: 7584: 7578: 7560: 7553: 7547: 7540: 7525: 7521: 7517: 7510: 7503: 7487: 7483: 7479: 7472: 7470: 7468: 7448: 7444: 7438: 7436: 7420:. govtrack.us 7419: 7413: 7397: 7391: 7372: 7368: 7361: 7354: 7338: 7334: 7328: 7313: 7309: 7302: 7300: 7298: 7281: 7274: 7272: 7256: 7255: 7250: 7243: 7228: 7222: 7218: 7217: 7209: 7192: 7187: 7183: 7176: 7161: 7157: 7150: 7148: 7146: 7126: 7119: 7112: 7110: 7108: 7106: 7104: 7102: 7085: 7081: 7075: 7067: 7061: 7057: 7050: 7048: 7031: 7027: 7021: 7005: 7001: 6995: 6979: 6973: 6957: 6953: 6947: 6931: 6925: 6909: 6905: 6899: 6891: 6885: 6866: 6859: 6852: 6850: 6848: 6829: 6822: 6814: 6810: 6804: 6797: 6785: 6778: 6771: 6760: 6753: 6746: 6735: 6728: 6721: 6715: 6708: 6707:0-536-34228-8 6704: 6700: 6694: 6678: 6674: 6667: 6665: 6663: 6661: 6659: 6657: 6655: 6653: 6636: 6629: 6627: 6610: 6606: 6602: 6598: 6591: 6589: 6587: 6585: 6577: 6565: 6561: 6554: 6552: 6535: 6531: 6524: 6517: 6515: 6513: 6511: 6509: 6507: 6505: 6503: 6501: 6499: 6490: 6486: 6482: 6478: 6474: 6470: 6463: 6456: 6454: 6452: 6440:September 13, 6436: 6432: 6425: 6418: 6402: 6398: 6392: 6384: 6380: 6377:: 1019–1051. 6376: 6372: 6368: 6367: 6362: 6356: 6354: 6352: 6350: 6348: 6339: 6333: 6318: 6311: 6309: 6307: 6305: 6303: 6287: 6280: 6273: 6271: 6269: 6267: 6265: 6263: 6261: 6259: 6257: 6255: 6253: 6251: 6249: 6247: 6231: 6227: 6223: 6219: 6215: 6211: 6204: 6197: 6195: 6193: 6191: 6174: 6170: 6164: 6157: 6153: 6150: 6145: 6126: 6122: 6115: 6109: 6107: 6105: 6103: 6087: 6086:FT Alphaville 6083: 6076: 6060: 6053: 6049: 6034: 6025: 6021: 6011: 6008: 6006: 6003: 6001: 6000:Recovery swap 5998: 5996: 5993: 5990: 5986: 5984: 5980: 5977: 5974: 5972: 5969: 5967: 5964: 5962: 5959: 5957: 5954: 5953: 5947: 5938: 5934: 5932: 5931:Movie Gallery 5921: 5918: 5917:balance sheet 5914: 5909: 5904: 5900: 5897: 5891: 5888: 5884: 5872: 5867: 5865: 5862:As described 5860: 5858: 5857:domino effect 5853: 5851: 5846: 5843: 5839: 5834: 5832: 5831:systemic risk 5828: 5821:Systemic risk 5818: 5816: 5815:Merrill Lynch 5812: 5807: 5802: 5798: 5796: 5790: 5788: 5784: 5779: 5777: 5772: 5770: 5765: 5759: 5757: 5752: 5748: 5746: 5742: 5731: 5729: 5725: 5721: 5717: 5714:Analogous to 5710:Sensitivities 5707: 5704: 5703:US Treasuries 5700: 5696: 5665: 5661: 5655: 5651: 5645: 5641: 5635: 5631: 5625: 5621: 5617: 5612: 5608: 5602: 5598: 5592: 5588: 5582: 5578: 5574: 5569: 5565: 5559: 5555: 5549: 5545: 5541: 5536: 5532: 5526: 5522: 5513: 5509: 5506: 5500: 5493: 5491: 5490: 5470: 5466: 5457: 5453: 5449: 5446: 5438: 5434: 5428: 5424: 5418: 5414: 5410: 5405: 5401: 5392: 5388: 5384: 5381: 5373: 5369: 5363: 5359: 5355: 5350: 5346: 5337: 5333: 5329: 5326: 5318: 5314: 5310: 5305: 5301: 5292: 5288: 5284: 5281: 5269: 5266: 5263: 5257: 5250: 5235: 5232: 5229: 5222: 5221: 5218: 5197: 5193: 5190: 5179: 5175: 5171: 5166: 5162: 5158: 5153: 5149: 5145: 5140: 5136: 5127: 5123: 5117: 5113: 5107: 5103: 5097: 5093: 5089: 5082: 5080: 5079: 5056: 5052: 5048: 5043: 5039: 5035: 5030: 5026: 5017: 5013: 5010: 5004: 4999: 4995: 4988: 4985: 4982: 4976: 4965: 4961: 4957: 4954: 4946: 4942: 4936: 4932: 4926: 4922: 4918: 4911: 4909: 4908: 4885: 4881: 4877: 4872: 4868: 4859: 4855: 4852: 4846: 4841: 4837: 4830: 4827: 4824: 4818: 4807: 4803: 4799: 4796: 4788: 4784: 4778: 4774: 4770: 4763: 4761: 4760: 4740: 4736: 4730: 4726: 4723: 4717: 4712: 4708: 4701: 4698: 4695: 4689: 4678: 4674: 4670: 4667: 4659: 4655: 4651: 4644: 4642: 4641: 4623: 4619: 4612: 4609: 4606: 4600: 4592: 4588: 4584: 4581: 4571: 4556: 4553: 4550: 4543: 4542: 4539: 4536: 4522: 4514: 4513:credit spread 4495: 4489: 4463: 4460: 4457: 4450: 4446: 4437: 4431: 4428: 4422: 4419: 4416: 4413: 4405: 4390: 4384: 4381: 4361: 4353: 4335: 4331: 4308: 4304: 4281: 4277: 4254: 4250: 4222: 4218: 4212: 4208: 4202: 4198: 4192: 4188: 4180: 4165: 4158: 4139: 4135: 4131: 4126: 4122: 4118: 4113: 4109: 4105: 4100: 4096: 4087: 4083: 4080: 4074: 4067: 4064: 4063: 4042: 4038: 4034: 4031: 4023: 4019: 4013: 4009: 4003: 3999: 3991: 3974: 3970: 3963: 3960: 3957: 3951: 3944: 3925: 3921: 3917: 3912: 3908: 3904: 3899: 3895: 3886: 3882: 3879: 3873: 3866: 3850: 3846: 3837: 3836: 3815: 3811: 3807: 3804: 3796: 3792: 3786: 3782: 3774: 3757: 3753: 3746: 3743: 3740: 3734: 3727: 3708: 3704: 3700: 3695: 3691: 3682: 3678: 3675: 3669: 3662: 3646: 3642: 3633: 3632: 3611: 3607: 3603: 3600: 3592: 3588: 3580: 3563: 3559: 3552: 3549: 3546: 3540: 3533: 3517: 3513: 3507: 3503: 3500: 3494: 3487: 3471: 3467: 3458: 3457: 3439: 3435: 3431: 3428: 3421: 3404: 3400: 3393: 3390: 3387: 3381: 3374: 3359: 3352: 3336: 3332: 3323: 3322: 3318: 3315: 3312: 3309: 3308: 3305: 3289: 3285: 3262: 3258: 3249: 3231: 3227: 3223: 3220: 3198: 3194: 3171: 3167: 3144: 3141: 3138: 3134: 3124: 3122: 3117: 3102: 3098: 3094: 3091: 3071: 3048: 3045: 3042: 3036: 3027: 3025: 3024:present value 3017: 3014: 3013: 3012: 2998: 2994: 2990: 2987: 2967: 2947: 2925: 2921: 2898: 2894: 2871: 2867: 2844: 2840: 2817: 2813: 2803: 2799: 2791: 2787: 2784: 2781: 2778: 2777: 2776: 2774: 2770: 2760: 2758: 2754: 2750: 2745: 2731: 2728: 2725: 2724: 2720: 2717: 2714: 2713: 2709: 2706: 2703: 2702: 2698: 2695: 2692: 2691: 2687: 2684: 2681: 2680: 2676: 2673: 2670: 2669: 2665: 2662: 2659: 2658: 2654: 2651: 2648: 2647: 2643: 2640: 2637: 2636: 2632: 2630:Elpida Memory 2629: 2626: 2625: 2621: 2618: 2615: 2614: 2610: 2607: 2604: 2603: 2599: 2596: 2593: 2592: 2588: 2585: 2582: 2581: 2577: 2574: 2571: 2570: 2566: 2563: 2560: 2559: 2555: 2552: 2549: 2548: 2544: 2541: 2538: 2537: 2533: 2531:Takefuji Corp 2530: 2527: 2526: 2522: 2519: 2516: 2515: 2511: 2508: 2505: 2504: 2500: 2497: 2494: 2493: 2489: 2486: 2483: 2482: 2478: 2475: 2472: 2471: 2467: 2464: 2461: 2460: 2456: 2453: 2450: 2449: 2445: 2442: 2439: 2438: 2434: 2431: 2428: 2427: 2423: 2420: 2417: 2416: 2412: 2409: 2406: 2405: 2401: 2398: 2395: 2394: 2390: 2387: 2384: 2383: 2379: 2376: 2373: 2372: 2368: 2365: 2362: 2361: 2357: 2354: 2351: 2350: 2346: 2343: 2340: 2339: 2335: 2333:Six Flags CDS 2332: 2329: 2328: 2324: 2321: 2318: 2317: 2313: 2310: 2307: 2306: 2302: 2299: 2296: 2295: 2291: 2288: 2285: 2284: 2280: 2277: 2274: 2273: 2269: 2266: 2263: 2262: 2258: 2255: 2252: 2251: 2247: 2244: 2241: 2240: 2236: 2233: 2230: 2229: 2225: 2222: 2219: 2218: 2214: 2211: 2208: 2207: 2203: 2200: 2197: 2196: 2192: 2189: 2186: 2185: 2181: 2178: 2175: 2174: 2170: 2167: 2164: 2163: 2159: 2156: 2153: 2152: 2148: 2145: 2142: 2141: 2137: 2134: 2131: 2130: 2126: 2123: 2120: 2119: 2115: 2112: 2109: 2108: 2104: 2101: 2098: 2097: 2093: 2090: 2087: 2086: 2082: 2079: 2076: 2075: 2071: 2068: 2065: 2064: 2060: 2057: 2054: 2053: 2049: 2046: 2043: 2042: 2038: 2035: 2032: 2031: 2027: 2024: 2021: 2020: 2016: 2013: 2010: 2009: 2005: 2002: 1999: 1998: 1994: 1991: 1989:British Vita 1988: 1985: 1984: 1980: 1977: 1975:British Vita 1974: 1971: 1970: 1966: 1963: 1960: 1957: 1956: 1952: 1949: 1946: 1943: 1942: 1938: 1935: 1932: 1931: 1927: 1924: 1921: 1918: 1917: 1913: 1910: 1907: 1904: 1903: 1899: 1896: 1893: 1892: 1888: 1886: 1883: 1880: 1879: 1875: 1872: 1869: 1866: 1865: 1861: 1858: 1855: 1852: 1851: 1847: 1844: 1841: 1838: 1837: 1833: 1830: 1827: 1824: 1823: 1819: 1816: 1813: 1810: 1809: 1805: 1802: 1799: 1796: 1795: 1791: 1788: 1785: 1782: 1781: 1777: 1774: 1771: 1768: 1767: 1763: 1760: 1757: 1754: 1753: 1749: 1746: 1743: 1740: 1739: 1735: 1733: 1730: 1727: 1726: 1722: 1720: 1717: 1714: 1713: 1709: 1706: 1703: 1700: 1699: 1695: 1692: 1689: 1686: 1685: 1681: 1678: 1675: 1672: 1671: 1667: 1664: 1661: 1658: 1657: 1653: 1651: 1648: 1645: 1644: 1640: 1638: 1635: 1632: 1631: 1627: 1625: 1624:Movie Gallery 1622: 1619: 1618: 1614: 1611: 1608: 1605: 1604: 1600: 1597: 1594: 1591: 1590: 1586: 1584: 1581: 1578: 1577: 1573: 1571: 1568: 1565: 1564: 1560: 1558: 1555: 1552: 1551: 1547: 1545: 1542: 1539: 1538: 1534: 1532: 1529: 1526: 1525: 1521: 1518: 1515: 1512: 1511: 1507: 1504: 1501: 1498: 1497: 1494: 1490: 1487: 1484: 1483: 1480: 1477: 1475: 1471: 1467: 1463: 1459: 1455: 1450: 1449:Dutch auction 1446: 1442: 1432: 1424: 1420: 1419: 1418: 1416: 1412: 1397: 1395: 1391: 1387: 1383: 1379: 1373: 1370: 1368: 1364: 1360: 1356: 1346: 1341: 1331: 1329: 1324: 1322: 1317: 1312: 1310: 1306: 1305:restructuring 1302: 1298: 1294: 1290: 1289:credit events 1285: 1283: 1279: 1273: 1271: 1267: 1263: 1258: 1256: 1252: 1248: 1244: 1240: 1236: 1232: 1228: 1218: 1216: 1211: 1207: 1197: 1193: 1184: 1179: 1174: 1171: 1167: 1158: 1156: 1151: 1147: 1143: 1138: 1134: 1131: 1127: 1123: 1120: 1119:Deutsche Bank 1110: 1108: 1103: 1098: 1094: 1092: 1087: 1085: 1081: 1077: 1072: 1070: 1065: 1062: 1057: 1055: 1051: 1047: 1041: 1039: 1029: 1021: 1012: 1003: 999: 995: 993: 987: 983: 977:Market growth 974: 972: 968: 965:(CFTC). The 964: 960: 956: 951: 949: 943: 940: 934: 932: 928: 924: 920: 916: 912: 908: 907:Bankers Trust 893: 890: 886: 878: 875: 872: 869: 868: 867: 863: 861: 857: 852: 848: 846: 841: 836: 833: 829: 820: 818: 813: 807: 802: 798: 797: 796: 794: 790: 784: 782: 776: 773: 769: 765: 760: 756: 754: 749: 740: 737: 735: 730: 726: 723: 718: 716: 711: 706: 704: 699: 697: 686: 683:November 2012 674: 669: 660: 659: 651: 649: 645: 644:Goldman Sachs 640: 639:synthetic CDO 636: 631: 624: 620: 616: 612: 609: 605: 601: 597: 596: 595: 587: 583: 582: 581: 578: 573: 571: 566: 564: 560: 554: 552: 548: 537: 535: 531: 527: 517: 515: 510: 507: 498: 494: 492: 491:credit rating 488: 484: 480: 475: 473: 464: 461: 457: 456: 455: 453: 440: 437: 433: 429: 426: 423: 420: 419:balance sheet 416: 412: 408: 405: 401: 398:based on the 397: 396:loss reserves 393: 390: 385: 381: 378: 377: 376: 373: 371: 367: 363: 358: 350: 347: 343: 338: 336: 332: 328: 320: 316: 312: 309: 305: 301: 300: 299: 297: 292: 290: 286: 281: 279: 273: 271: 267: 263: 259: 254: 252: 248: 242: 240: 239:credit rating 235: 233: 214: 168: 154: 150: 148: 144: 140: 135: 133: 129: 125: 121: 117: 107: 105: 101: 97: 93: 92:systemic risk 89: 78: 76: 72: 68: 63: 58: 56: 52: 48: 44: 40: 31: 23: 19: 10666:Forward rate 10577:Total return 10531: 10465:Real options 10368:Ratio spread 10348:Naked option 10308:Debit spread 10139:Fixed income 10081:Strike price 9958:. Retrieved 9954:the original 9949: 9930: 9919: 9901: 9890: 9872: 9866: 9851: 9840: 9829: 9815:BusinessWeek 9814: 9772:fintools.com 9741:John C. Hull 9721:cite journal 9689: 9627: 9618: 9603:by removing 9590: 9558:. Retrieved 9553: 9544: 9532:. Retrieved 9528: 9519: 9507:. Retrieved 9503: 9494: 9482: 9470:. Retrieved 9466:the original 9456: 9447: 9434: 9413: 9404: 9395: 9388: 9364: 9358: 9337:cite journal 9325:. Retrieved 9302: 9281: 9269:. Retrieved 9265:the original 9254: 9242: 9230: 9218:. Retrieved 9211:the original 9197: 9185: 9173: 9163:December 21, 9161:. Retrieved 9147: 9135:. Retrieved 9124: 9116: 9107: 9095:. Retrieved 9078: 9066:. Retrieved 9062:the original 9052: 9040:. Retrieved 9035:the original 9009:. Retrieved 8999: 8987:. Retrieved 8982: 8973: 8961: 8934: 8903: 8887: 8875:. Retrieved 8871: 8862: 8846: 8836: 8827: 8815:. Retrieved 8801: 8789:. Retrieved 8785:the original 8760:. Retrieved 8755:the original 8744: 8732:. 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Retrieved 7923:the original 7918: 7908: 7896:. Retrieved 7886: 7874:. Retrieved 7870: 7860: 7851: 7841: 7833: 7809:. Retrieved 7805: 7802:"Outsmarted" 7778:. Retrieved 7774: 7734: 7702:. Retrieved 7695:the original 7677:(4): 54–60. 7674: 7668: 7631:cite journal 7596: 7588: 7566:. Retrieved 7559:the original 7546: 7538: 7531:. Retrieved 7524:the original 7519: 7515: 7502: 7490:. Retrieved 7486:the original 7481: 7454:. Retrieved 7447:the original 7422:. Retrieved 7412: 7400:. Retrieved 7390: 7378:. Retrieved 7371:the original 7366: 7353: 7341:. Retrieved 7336: 7327: 7315:. Retrieved 7311: 7284:. Retrieved 7258:. Retrieved 7252: 7242: 7230:. Retrieved 7215: 7208: 7196:. Retrieved 7191:the original 7185: 7175: 7163:. Retrieved 7159: 7132:. Retrieved 7125:the original 7088:. Retrieved 7083: 7074: 7055: 7034:. Retrieved 7030:the original 7020: 7008:. Retrieved 7004:the original 6994: 6982:. Retrieved 6972: 6960:. Retrieved 6956:the original 6946: 6934:. Retrieved 6924: 6912:. Retrieved 6908:the original 6898: 6872:. Retrieved 6865:the original 6834:. Retrieved 6821: 6812: 6803: 6794: 6787:. Retrieved 6777: 6769: 6762:. Retrieved 6752: 6744: 6737:. Retrieved 6727: 6714: 6698: 6693: 6681:. Retrieved 6676: 6639:. Retrieved 6613:. Retrieved 6609:the original 6604: 6600: 6575: 6568:. Retrieved 6564:the original 6538:. Retrieved 6533: 6529: 6472: 6468: 6438:. Retrieved 6430: 6417: 6405:. Retrieved 6401:the original 6391: 6370: 6364: 6320:. Retrieved 6289:. Retrieved 6285: 6233:. Retrieved 6213: 6209: 6177:. Retrieved 6173:the original 6163: 6144: 6132:. Retrieved 6125:the original 6089:. Retrieved 6085: 6075: 6063:. Retrieved 6052: 6033: 6024: 5982: 5944: 5935: 5927: 5905: 5901: 5892: 5879: 5861: 5854: 5849: 5847: 5835: 5824: 5803: 5799: 5791: 5780: 5773: 5760: 5753: 5749: 5737: 5719: 5718:for a bond, 5713: 5692: 5216: 4537: 4241: 4065:No defaults 3319:Probability 3310:Description 3125: 3118: 3028: 3021: 2795: 2766: 2746: 2742: 2311:Visteon LCDS 1478: 1466:Felix Salmon 1440: 1438: 1429: 1415:cash settled 1414: 1410: 1408: 1378:restructured 1377: 1376:the debt is 1374: 1371: 1352: 1325: 1315: 1313: 1304: 1296: 1292: 1288: 1286: 1281: 1277: 1274: 1269: 1265: 1261: 1259: 1254: 1250: 1238: 1234: 1227:confirmation 1226: 1224: 1215:Major losses 1203: 1194: 1190: 1181: 1176: 1172: 1168: 1164: 1152: 1148: 1145: 1140: 1135: 1132: 1128: 1124: 1116: 1099: 1095: 1088: 1073: 1066: 1058: 1053: 1049: 1042: 1035: 1026: 1000: 996: 988: 984: 980: 952: 944: 939:Bill Demchak 935: 904: 888: 882: 864: 859: 853: 849: 844: 837: 827: 826: 814: 811: 793:basis points 785: 777: 770:the bank is 761: 757: 753:participants 750: 746: 738: 731: 727: 719: 710:George Soros 707: 700: 695: 693: 680: 672: 632: 628: 622: 618: 614: 607: 603: 599: 592: 574: 567: 555: 543: 523: 511: 508: 504: 495: 476: 469: 449: 374: 361: 359: 356: 345: 341: 339: 331:basis points 324: 318: 314: 307: 293: 282: 277: 274: 270:credit event 255: 243: 236: 228: 151: 136: 113: 84: 59: 55:credit event 42: 38: 36: 18: 10912:Credit risk 10597:Zero Coupon 10527:Correlation 10475:Vanna–Volga 10333:Iron condor 10119:Bond option 9960:October 19, 9133:. Bloomberg 9068:November 6, 8877:January 26, 8838:MarketWatch 8493:. Bloomberg 8271:. Bloomberg 7282:. Bloomberg 6789:November 3, 6764:November 3, 6739:November 3, 6637:. Bloomberg 6540:January 13, 6475:: 271–282. 6291:December 9, 6065:January 31, 5985:(2010 film) 5838:mutual fund 5825:During the 5724:basis point 2726:2015-10-06 2715:2015-09-17 2704:2015-06-23 2693:2015-03-05 2682:2015-02-19 2300:Visteon CDS 2179:Idearc LCDS 2091:Great Lakes 2003:Nortel Ltd. 1705:Freddie Mac 1691:Freddie Mac 1210:J.P. 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