Friday, October 28, 2011

The trashing of Credit Default Swaps

Acting Man blog will be reporting more fully later today on what has occurred in the Greek CDS market, since the non-credit-event 50% haircut for banks on their Greek Bonds, read here with a chart. A quote:

Due to time constraints we will only be able to post a more elaborate update after the NY market closes today, but we wanted to quickly make a note on the 'Greek haircut' situation. As we pointed out yesterday, an amazing feat was accomplished by the negotiators: they got the banks to accept a 50% haircut on the Greek government debt they hold, and yet, it is officially not a 'default' – it isn't even a 'credit event'. This has had a massive effect on sovereign credit default swaps, which as of now can no longer be trusted as hedging instruments.

Update 1515 BST More reading and video.



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