Credit Default Swaps: An Update

April 14th, 2015 by Kara in Case Studies

By: Arjyo Mitra The CDS A credit default swap (CDS) is a financial transaction that is based on the risk of a certain underlying event. It derives its value from its promise of protection from the debilitating effects of the event. However, its use in financial markets has evolved to serve more complex purposes than simply offering protection against risk. Buyers and sellers are brought together in an arrangement in which the buyer of the CDS protection makes periodic payments (also known as “premiums” or “spreads”) to the seller. In exchange for these ...