As nightmarish memories of September 2008 fade, the financial industry is gearing up to fight new regulations. The battle lines are being drawn and became more visible this week. (more…)
Posts Tagged ‘derivatives’
The Empire Strikes Back
Posted in derivatives, Finance & the Public Interest, financial crisis, tagged derivatives, financial crisis on June 4, 2009| 1 Comment »
Credit Default Swap Update
Posted in CDS, derivatives, Finance & the Public Interest, financial institutions, Goldman Sachs, tagged credit default swaps, derivatives on September 18, 2008| 20 Comments »
In a blog entry almost six months ago, I suggested that prices for credit default swaps (CDS) would tell us when the financial crisis was winding down. Unfortunately, the data this week tell us that the end is not in sight. This is probably obvious to you given the news headlines of the last few days, but looking at credit default swaps can help us understand how bad things are. (more…)
When Will We Know?
Posted in CDS, derivatives, Finance & the Public Interest, tagged credit default swaps, derivatives on April 1, 2008| 3 Comments »
Reporter: But now I’m asking you: When will we know?
Henry Hurt: Blackout lasts for 3 minutes. If they’re not back in 4, we’ll know.
—Apollo 13
When will we know that the credit crisis is over? One way to tell will be by looking at the market for credit derivatives. Credit default swaps (CDSs) permit investors to buy or sell insurance against the event that a specific company defaults (or more generally, experiences a “credit event”). The buyer of insurance pays a quarterly or semiannual premiums to the seller. In return, the seller promises in the event of default to pay the buyer the loss in bond value due to default. When CDS premiums are high, it is a sign that investors are worried about a default. (more…)