U.S.’s debt-ceiling predicament has put spotlight back on credit-default swaps


It’s usually not a good sign when obscure financial instruments are making headlines. And that’s the case now as the political standoff over the U.S. government’s debt ceiling puts credit-default swaps back in the spotlight.

How CDS work

Credit-default swaps, or CDS, are instruments that effectively allow a lender to insure against default by a borrower. An investor who owns a corporate bond, bank credits or government debt, can buy CDS to protect against default. Speculators can also use CDS to place bets, though…

This article was originally published by Marketwatch.com. Read the original article here.

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