Untangling credit default swaps
August 1, 2010 by TheRainMaker
Filed under Securitizations
When the analysts and experts talk about the current financial crisis, they often refer to credit default swaps. So, what exactly is a credit default swap? Marketplace Senior Editor Paddy Hirsch goes to the whiteboard for this explanation.
Video Rating: 4 / 5
Good except you did not mention that the ratings agencies themselves were in on the grift by over-rating everything with AAA which ensured them a continuous stream of new ratings business.
HOW ABOUT THIS WE GO TO THE BANK YES WE AND THE BANK CREATE NEW MONEY WE GET £10.000.Say AND THE BANK GETS £10.000 SAY .ALL AT THE SAME TIME ON THE SAME DAY..NO ONE OWES..NO ONE..WE ALL GOT OUR MONEY..AS WE CREATED IT.SO THE old WAYS OF BANKING OUT OF Dated.ALL BANKS AM going uder.UK GOVERNMENTS AT TO BUY ALL THERES AND EU AND USA ….AM LIKE GREASE BANKRUPT NEARLY..ITS GOING TO BE A BIG WW3 THATS Y THERE WARS SOMETIMES TO START NEW WORLD ORDERS AND THE ANWER HERE WITH US
Thank you for posting this.
Awesome ,, explains everything about the financial mess
Great explanation!! Thanks!!!
i think he is confusing free markets to mean “free from government regulation” markets.. the lack of regulation can lead to the undermining of healthy competition in order for a market to be in any sense “free”… is that close?
Corporatism vs. capitalism? How can you make a distinction between the 2 when the corporation is the greatest functioning aspect of our capitalist society?
As if a deregulated free market weren’t deigned for the corporation & by the corporation nimrod. You know someone is an oxymoron when they say they’re against corporatism but then turn right around and say “but I’m for a deregulated free-market. It must be very embarrassing to be you right now. lmao!
@SIGN666 – what you describe is corporatism – not free markets. Free markets are exactly that – they involve NO govt interference, be it govts “willing to back them up at tax payers expense..” or any bail outs for companies like AIG.
Caveat Emptor.
Public BANKING!
This is all deeply rooted in the ideology of deregulated free market capitalism where we let financial institutions, banks & corporations dictate and everybody is at the mercy of big business & a tyrannical government willing to back them up at tax payers expense. The government knew what was going on but allowed it for the sake of profit. And AIG is too big to fail because of contracts & we’re all just supposed to sit back & take the abuse. Why don’t we just overthrow the government? (-A-)
Thank you. You made the concept very easy to understand.
Awesome video, i did a search on wiki and other investor sites but was still confused. You explained it well. Thank You
W. Buffett owns 20% of Moody’s
very easy to understand
Why do “teachers” have to make simple things so complicated? A credit default swap is a bet against the failure of whatever it’s written against. $50 Trillion dollars worth of these things were written against American Home Mortgages. -Now, do you think the men on Wall Street who invented these things, and spent billions of dollars buying them have an interest in seeing you default on your mortgage? -THINK about it, because this guy will do nothing but lead you in circles.
well …
the real problem of that system has not been tackled in my opinion !
The Rating company also has a intrest in these deals … who is watching the rating companys ?
No major changes have been implemented !
WHY NOT ???
Brgds
GSO
collateral exists to reimburse the creditor / customer in the event institution is unable to honor its commitments, i.e. it defaults. In other words it guarantees you will be paid back in any situation. As for sam expecting gm to fail, i suppose in that case he can effectively rip off jim, but in the end theyll both loose money unless maybe sam was in a bet and being paid by someone else.
I want to pull off the biggest CDS scam in history.
WHO WANTS TO JOIN ME AND BECOME RICH?!?
p.s. great teaching, great vid,
5/5
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
America has turned away from Thomas Jafferson ideals to a Hamiltonian head that the price u have all paid kissing the english mercantile asses
impressive!
simple solution – no insurable interest on the respective financial instrument means you cannot buy a credit default swap on that instrument
yep – you don’t have to own the underlying bonds to trade the CDS