CREDIT DEFAULT SWAPS – WEAPON OF MASS DESTRUCTION OR RELIABLE INDICATOR?

In: Economic affairs: journal of the Institute of Economic Affairs, Band 32, Heft 1, S. 72-74

Abstract

Credit Default Swaps (CDS) are said to increase systemic vulnerability, but they also serve as an ex‐ante indicator of default probabilities, more finely‐tuned and more responsive than ratings agency reports. And they provide a useful mechanism for trading risk and an incentive for good management by businesses and governments.