Pathology in the Credit Default Swaps market
Credit Default Swaps, which originated as legitimate finance instruments that acted as a kind of insurance (offsetting risk in return for a premium), morphed into something more akin to high stakes gambling.
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The Global Financial Crisis »The Global Financial Crisis
Immediate triggers of the financial crisis? »Immediate triggers of the financial crisis?
Pathology in the Credit Default Swaps market
CDS market complex, unregulated and secretive »CDS market complex, unregulated and secretive
Complex financial instruments that few understood »Complex financial instruments that few understood
Credit default swaps became divorced from underlying value »Credit default swaps became divorced from underlying value
Hedging/Netting contracts created web of vulnerability »Hedging/Netting contracts created web of vulnerability
Monoline insurers struggling to meet guarantees »Monoline insurers struggling to meet guarantees
Reckless securitisation on top of reckless lending »Reckless securitisation on top of reckless lending
Resources of regulators limited in comparsion to market players »Resources of regulators limited in comparsion to market players
Speculative swaps grew to dwarf real insurance swaps »Speculative swaps grew to dwarf real insurance swaps
Vast scale of rewards encouraged complicity with system »Vast scale of rewards encouraged complicity with system
Foreign governments fled US agency bonds »Foreign governments fled US agency bonds
Investment banks incentivised to move into riskier activities »Investment banks incentivised to move into riskier activities
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