Credit default swaps (CDS), those bad actors from the 2008 financial crisis, are back. In this intrepid dispatch, Bloomberg Businessweek’s Claire Boston and Davide Scigliuzzo report that a few financial wizards are gaming CDS contracts. CDS play a straightforward role in letting a lender hedge against default risk, but in an unexpected twist, inventive traders are buying contracts to protect against default risk and then rewarding the borrower in question for defaulting. Market watchers and investors will find this an eye-opening read.
About the Authors
Claire Boston covers credit markets for Bloomberg, where Davide Scigliuzzo is a corporate finance reporter.