Financial Math CDS Presentation

Financial Math CDS Presentation - Click to edit Master...

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Unformatted text preview: Click to edit Master subtitle style 8/9/11 Credit Default Swaps (CDS) Elvis Pea (10-0929) Nicole Perez (10-0428) Milton de Aza (10-0033) Milton Hernandez (10-0890) Valerie Bodden K. (10-0014) 8/9/11 Content Definition Video History - Development and Crisis Valuation Formulas Market In which It Is Traded 8/9/11 Definition Credit Default Swaps (CDS) are a private contract between two parties in which the buyer of protection agrees to pay premiums to a seller of protection over a set period of time. In return, the seller of protection agrees to pay the buyer an amount of loss created by a "credit event" related to an underlying credit asset (loan or bond) - the most common events are bankruptcy, restructuring or default. 8/9/11 Definition CDS are not a form of insurance, they are investments that " bet " on whether a " credit event " will or will not occur. Because Credit Default Swaps are a financial instrument, they are not subject to the same regulations that insurance companies are. There are no regulatory capital requirements for the seller of protection (such as exists with insurance 8/9/11 How It Works Click to edit Master subtitle style 8/9/11 Video Time 8/9/11...
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Financial Math CDS Presentation - Click to edit Master...

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