Tuesday, Dec 16, 2008
Cost to insure government debt default soars again
FT Alphaville: The mystery meaning of sovereign CDS
Interestingly the article points out the limitations of insuring against government default. Faced with default, it is more likely that the government would print money to repay, thereby inflating its way out of the issue. And if the goverment did decide to default rather than inflate, it would be inlikely that the insurer would/could pay out anyway.
Posted by doom&gloom @ 01:41 PM (232 views) Add Comment
1 Comment
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1. techieman said...
fair points made. I am not a particpant in this market but understand it may be a way of betting who has more risk relative to another soverign state. For example you might sell UK and buy German, then if it goes your way unwind both positions.