The only way to hedge that debt was to buy default insurance via the swaps market.
There is no clarity about who the biggest issuers of default insurance on Greece are.
In Italy and France, for example, the big rise in prices that creditors to their banks have to pay for default insurance has tracked a significant rise in the price that creditors to their respective governments pay for protection.
One of the ways the market measures credit risks is by looking at the spreds of credit default swaps, a default insurance derivatives market that measures the risk of buying foreign bonds as compared to buying a comparable maturity from the US Treasury.
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Assuming the feds had done right and let AIG go under (its error one of failing to hedge its exposure to CDSs), those in need of credit default insurance could have simply taken their business to other financial companies ready and willing to provide what AIG no longer could.
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Spreads on both investment-grade credit-default swaps (insurance against bond default) and on high-yield indices have increased sharply.
Prices of credit-default swaps, a form of insurance against default, hit record levels on January 20th.
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Second, if Greece unilaterally imposes losses, bondholders who have bought credit-default swaps (CDSs), a form of insurance against default, would get paid.
That is because a default would trigger the bond-insurance contracts called credit-default swaps (CDSs).
French and German banks bought Greek bonds, and they took out insurance against default.
The cost of buying insurance against default by GM increased by 10% in the credit-default swaps market.
For now, credit default swaps are essentially insurance contracts between two parties.
Credit default swaps are essentially insurance contracts between two parties.
Canadians who take out mortgages worth more than 80% of the value of the property must also take out insurance against default from a federal agency, the Canada Mortgage and Housing Corporation.
The Economist has compiled a credit-crunch index, comprising a number of measures on everything from bank lending to the cost of buying insurance against default for banks, firms and sovereigns in the euro zone.
This will not be helpful to US banks which may have insured the European banks through the use of credit default swaps if these insurance contracts have to be unwound upon a Greek bankruptcy.
The Department of Financial Services said the agreements also call for restitution to homeowners erroneously charged for or driven into default by force-placed insurance.
Essentially, this money machine used extreme diversity and interlinking of transactions plus the insurance (credit default swaps) to give the appearance of reducing risk such that there could be a AAA rating.
That, too, could trigger pay-outs of insurance, called credit default swaps (CDS).
The loan guarantee acts as lenders' insurance in case of default or unforeseen delay for technologies trying to go commercial for the first time.
Bank B bought the CDS or insurance against an Italian default.
For example, an investor or bank may have bought a swap as insurance against an AIG default, with Lehman on the other side of the deal.
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Credit-default swaps, a type of insurance against bankruptcy, suggest that the borrowing costs of big emerging-markets firms have spiked along with those of their home countries' governments.
Credit-default swaps, or CDS, are insurance-like contracts designed to pay off when creditors aren't paid back.
Economic growth will help prevent another financial time bomb--credit default swaps, a form of debt insurance--from exploding.
Greenberg superimposed the credit default swap guarantee business on a sound insurance underwriter.
One such monster could be the destruction of credit default swaps (CDS), an insurance for the kind of financial meltdown happening in Greece.
Oh, AIG is a bit more of a problem, but forbidding them from issuing things like credit default swaps to avoid regulation by the insurance regulators and the insurance regulators forbidding them from insuring financial transactions that are not easily understood and rated would go a long way.
When someone mentions credit default swaps you start to waver a bit but insurance in all its forms might be considered more worthy.
They offer their usual default position: if the government would only pay for insurance everything would be fine.
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