10 Comments for Untangling Credit Default Swaps

• 1. jerseyjack  |  October 1st, 2009 at 1:38 pm

  cds IS insuring the entire risk 500k is just the collateral. The entire amount is supposed to be paid back in order to make the insured “whole”. Companies like AIG were taking on more than they could handle. When large corps like GM go south they may or may not be able to cover everyone’s losses. When they are forced to go public no one knows if they’ll be made whole or not…thus causing a panic. I’m not an expert…but that seems to be the case to me.

• 2. oesterle6  |  October 1st, 2009 at 2:08 pm

  Thank you, Thank you! I finally get what happened. Even CNBC didn’t explain it so clearly in their layperson specials.

• 3. FA9082  |  October 1st, 2009 at 2:16 pm

  Very comprehensive video, thank you for the service.

• 4. fukinh0t  |  October 1st, 2009 at 2:44 pm

  I need someone to help clarify a part. In the example, Jim has to put 500k collateral. So if the 5 million investment goes down to 4 million, will Jim have to pay the 1 million difference or will it only pay 500k?

• 5. lateralexrex  |  October 1st, 2009 at 3:07 pm

  500k. The collateral is still Jim’s, it’s just to demonstrate that he will be able to cover his debts.

• 6. fukinh0t  |  October 1st, 2009 at 3:57 pm

  So then the credit default swap is only insuring up to the collateral and not the full amount os the loss?

• 7. Eyunbin  |  October 1st, 2009 at 4:18 pm

  what I think is… Jim needs to pay the difference to Sam. the collateral is only an protection for Sam when Jim is down rated or even default. I’m not quite sure… do varify me

• 8. learnanddeliver  |  October 1st, 2009 at 4:42 pm

  Thank you, excellent analogy and explanation

• 9. rdnavarre  |  October 1st, 2009 at 5:04 pm

  Absolutely EXCELLENT video!!!

• 10. utewb11  |  October 1st, 2009 at 5:52 pm

  Best explanation so far….thank you

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