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Intercontinental Exchange, Inc. Message Board

  • elmojitogatico elmojitogatico Aug 25, 2010 5:49 AM Flag

    CDS's a growing market

    The Markit CDX North America Investment Grade Index of credit-default swaps tied to the debt of 125 U.S. and Canadian companies rose...
    A basis point on a credit-default swap protecting $10 million of debt from default for five years is equivalent to $1,000 a year. Bloomberg news
    650 TRILLION MARKET & by 2011 well north of 1 quadrillion. Do the math if it takes $1000 per year on $10 million, how much is that on 1 quad./ yr. ?
    $1,000,000,000.00/yr./ basis point = possible income (ice #1 benefactor).

    CDS will continue to play an increasing role because even as people go into the bonds, they’re going to start worrying about default risk increasing,” Sri-Kumar said. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase signals deterioration in perceptions of credit quality (more CDS's).

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