WHAT IS CDS ? CDS = Credit default Swaps In simplest form - TopicsExpress



          

WHAT IS CDS ? CDS = Credit default Swaps In simplest form Its buying insurance against a default. Example Im a banker, gave car-loans to dude, but Im afraid he might not pay back the full money. So Ill goto some other Bank X who sells Credit default Swaps (CDS). Ive to pay regular premium Bank X, but if someday that dudes default on his car-payment, Bank X will pay me the money. RBI is currently drafting rules for starting a CDS market in India. These CDS bonds, once issues, can be sold and bought like any other bond or security. i.e. Bank X sells my CDS to Bank Y. So now Bank Y gets my premium but in case of default by that Dude, Bank Y is supposed to pay me.
Posted on: Tue, 29 Oct 2013 03:05:38 +0000

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