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This is good coverage of what I've read about via this site, explained well.

You could buy a CDS without having anything to do with the asset covered. Bizarre!

He mentioned there may be more CDS than houses in some areas!

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This is good coverage of what I've read about via this site, explained well.

You could buy a CDS without having anything to do with the asset covered. Bizarre!

He mentioned there may be more CDS than houses in some areas!

THe current market is like trying to talk a suicidal man down off a roof!!

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THe current market is like trying to talk a suicidal man down off a roof!!

by shouting "jump ya pr!ck"

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You could buy a CDS without having anything to do with the asset covered. Bizarre!

I thought just that...surely you just pick a sector where the market hasn't priced the risk properly for the probability of an event - and bobs your uncle.

That guy in Malibu must have made a fortune. So would everyone else on here if they knew how to do it.

Where can I get hold of some CDS's?! ;)

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Wasn't listening closely until the figures came up.

Can someone on this site with the knowledge explain to me in simple terms what this really is.

Sounds like some very clever form of insurance which can be claimed on no matter what - and it isn't regulated?

If this is true - no wonder the Us govt is stepping in to protect FMae and FMac.

To those in the know - how could this lead to the next unforeseen "crash"? Is the rescue by the US govt enough - and what about the UK - will our govt need to step in and do the same - was this the logic and fear behind backing Northern Rock?

Thanks.

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Do we think that CDS will start to unwind even though Fannie and Freddie are safe for the moment ?

Why do you think it's on newsnight?

Get ready sheeple!

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Please can someone put me out of my misery - "the posts last year were scarey" - can the posters please comment and explain back to the sad people like me who just heard it and have thought what the **** is this - and why don't we know about this.

Sorry for not paying more attention to Newnight - was about to go to bed now I'm very worried - and just opened a bottle of wine whilst researching the net - but it's all to high brow for me to understand (don't shoot me down please!!!).

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You are correct in that credit default swaps are a form of insurance. Whenever you deal with a counterparty (the other guy) there is the risk of the counterparty defaulting (not paying). So you buy the a CDS to cover yourself against this. If for example you bought a bond from a AAA bank then the CDS would be cheap since the chance of default is small. If for some reason the counterparty does not pay up, then the seller of the CDS will have to.

One of the best businesses to be in is earthquake insurance. You pick up premiums year after year for nothing. Then when the earthquake hits and you have to pay out for the damaged buildings, you simply declare bankruptcy. The insurance industry only works fine when risks are normal, it is regulated and requires reserve capital etc. CDS are pretty much unregulated.

Don't believe the huge numbers bounded around for this. The banks that write these things have netting agreements. This means that A may be liable to B for 10 million, but B is liable to A for 9 million. So although there are 19 million of contracts there, the net is only 1 million.

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Please can someone put me out of my misery - "the posts last year were scarey" - can the posters please comment and explain back to the sad people like me who just heard it and have thought what the **** is this - and why don't we know about this.

Sorry for not paying more attention to Newnight - was about to go to bed now I'm very worried - and just opened a bottle of wine whilst researching the net - but it's all to high brow for me to understand (don't shoot me down please!!!).

Normally posts responding to this open with "it's all very simple" and then descend into a hellish nightmare of equations, jargon and anacronyms.

Such classics as "MQF swap rate inverse tripled with Heliotope biped MFO is Arthur Crabtree on steroids" or "12% over par, one birdie and a round of drinks at the clubhouse in the klingon futures meerkat."

More seriously -

http://www.housepricecrash.co.uk/forum/ind...showtopic=79344

HPC has a 23 page thread about them. Enjoy.*

*yeah, right.

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CDS meltdown avoided due to US Government intervention in Fannie Mae/Freddie Mac...allegedly.

You might, just possibly, have misplaced the word "yet" from your post. I think it goes just after the "avoided".

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Please can someone put me out of my misery - "the posts last year were scarey" - can the posters please comment and explain back to the sad people like me who just heard it and have thought what the **** is this - and why don't we know about this.

Sorry for not paying more attention to Newnight - was about to go to bed now I'm very worried - and just opened a bottle of wine whilst researching the net - but it's all to high brow for me to understand (don't shoot me down please!!!).

heather5

i've copied the wiki entry below - it's pretty similar to betting. neither party has to own anything connected to the "reference entity" that may or may not go bust. now multiply this to unimaginable levels, nominally way in excess of USA GDP (times 5, I think). problem is, totally unregulated, and if too many shoes drop at once, these pieces of "valuable" paper sitting in everyone's safes as "assets" might only be good for @rse wipe.

wiki entry

-----------------

A credit default swap (CDS) is a credit derivative between two counterparties, whereby one makes periodic payments to the other and receives the promise of a payoff if a third party defaults[1]. The former party receives credit protection and is said to be the "buyer" while the other party provides credit protection and is said to be the "seller". The third party is known as the "reference entity".When a credit event in the reference entity is triggered, the protection seller either takes delivery of the defaulted bond for the par value (physical settlement) or pays the protection buyer the difference between the par value and Recovery amount of the bond (cash settlement). Simply, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.

For example, ABC Corporation may have its credit default swaps currently trading at 265 basis points (bp). In other words, the annual cost to insure 10 million euros of its debt would be 265,000 euros. If the same CDS had been trading at 7 bp a year before, it would indicate that markets now view ABC as facing a greater risk of default on its obligations.

Credit default swaps resemble an insurance policy, as they can be used by debt owners to hedge, or insure against credit events such as a default on a debt obligation. However, because there is no requirement to actually hold any asset or suffer a loss, credit default swaps can also be used for speculative purposes.

Credit default swaps are the most widely traded credit derivative product.[2] The typical term of a credit default swap contract is five years, although being an over-the-counter derivative, credit default swaps of almost any maturity can be traded.

-----------------

Edited by hogwash

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This is good coverage of what I've read about via this site, explained well.

You could buy a CDS without having anything to do with the asset covered. Bizarre!

He mentioned there may be more CDS than houses in some areas!

It was a great piece. Getting onto Newsnight is a big deal. Only 6 months ago the BBC covered all this with Evan Davies at a cross-roads, with some bad weather in one direction to indicate the future. Now the BBC is getting more into proper analysis, and because the opinion formers are likely to watch newsnight, it means the real stories are coming out.

I did wonder though whether most CDS were residential? I'd have guessed that most are corporate?

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Thod - BIG thanks - at least I can sort of go to bed sort of understanding.

"The banks that write these things have netting agreements. This means that A may be liable to B for 10 million, but B is liable to A for 9 million. So although there are 19 million of contracts there, the net is only 1 million. "

Sorry to be so thick - I really am a lay-person. So there are companies specialising in these things (are they company C?) - and they, because they are unregulated - can just declare bankruptcy - and then company A and B are then liable for the debts and they, company C, get away scot free because of the lack of regulation and bankruptcy?

This really does sound like the next "wave" of things to come - but I may be just worrying unnecessarily?

Thanks again for any help you can give me.

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THANK YOU Injin, Optobear and Thod - will now follow threads and learn whilst quaking .....

Oh the joys of discovering that no matter how old you get - there's so much left to learn!!!!

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Wasn't listening closely until the figures came up.

Can someone on this site with the knowledge explain to me in simple terms what this really is.

Sounds like some very clever form of insurance which can be claimed on no matter what - and it isn't regulated?

Basic explanation

http://video.google.com/videoplay?docid=-1596267321681457618 In depth explanation

These other videos below are much easier to understand and may be more helpful as an introduction.

MBS 1 simple explanation
MBS 2
MBS 3
CDO

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was about to go to bed now I'm very worried - and just opened a bottle of wine whilst researching the net - but it's all to high brow for me to understand (don't shoot me down please!!!).

You have the right attitude: as the Russian Grand Duke said "between the revolution and the firing squad there is always time for a bottle of champagne".

Enjoy the wine, and let its gentle sway smooth the coming catastrophe!

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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