Thursday, Oct 23, 2008
Useful info
Yahoo: Find Out How Safe Your Bank Is
n Spot Banks Before They Go Bust, I explained the usefulness of credit default swaps (CDSs) in terms of measuring risk. CDSs provide insurance on debt, guaranteeing a holder's money will be covered if a company goes under. The riskier a bank, the more expensive it is to insure its debts.
CDSs are measured in basis points (one hundredth of a percentage point). If a bank has a CDS of 100, insuring a £1 million investment would cost £10,000. To put things into perspective, CDSs in Icelandic banks were trading near 3,000 basis points before they went bust.
Posted by mark @ 05:55 PM (166 views) Add Comment
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