Credit-default swaps can be bought as protection against the default of a bond or loan, or they can be sold to create some income in exchange for guaranteeing a credit exposure.

ECONOMIST: Telecoms debt

Banks bought protection on credit derivatives from monolines in the form of credit-default swaps.

ECONOMIST: The credit crisis

The necessary steps would also involve full "mutualisation" of eurozone sovereign debt, the pooling of sovereign liabilities, which would permit the European Central Bank to be the lender of last resort to the currency union - and give the eurozone the kind of protection against the risk of default that the UK and the US have.

BBC: Has the eurozone flunked the market's test again?

With that promise in hand, the bank would make the purchase and immediately sell it onto the buyer at a mark-up, agreeing the buyer could pay, say, three months after goods are delivered--in effect, trade finance at a fixed rate with legal protection against default on the one side and loan sharking on the other.

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