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In recent years, there has been quite a buzz about credit default swaps. The turn of events following the 2 0 0 8 Global Financial
In recent years, there has been quite a buzz about credit default swaps. The turn of events following the Global Financial crisis became a test of the systems that settle credit default swaps.
Define credit default swaps CDS and why they are necessary.
Reliant Capital has invested Rm in bonds issued by Swartklip PGM Exploration. Reliant is worried that Swartklip PGM Exploration may face a financial crisis. Therefore, Reliant buys Rm worth of CDS protection on Swartklip PGM Exploration debt for two years from Kwena Investment Bank at a premium of bps per annum. Explain scenarios of default and no default.
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