Good ideas and conversation. No ads, no tracking. Login or Take a Tour!
Credit-default swaps insuring $10 million of Greek debt for five years cost $6.1 million in advance and $100,000 annually, according to CMA. That implies a greater than 90 percent chance the government will default in that time, assuming investors recover 32 percent of their holdings.
Seems the smart money is on a default.
smoorman1024 · 4603 days ago · link ·
Interesting, I am surprised the net notional out is not greater. If I remember correctly (and I can't find a source for this right now) the notional amount of CDS out on mortgage backed securities during the credit crisis was greater than the actual value of the securities themselves.
I might expect with something more transparent like Greek government debt the notional amount on their bonds would be greater than it is.
–
Yeah, that surprised me too. CDSs might be more tightly regulated in the EU?
According to Wikipedia: "estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion." According to the Fed, there is about 2.1 trillion USD in circulation right now: http://www.federalreserve.gov/releases/H6/Current/ Which IMHO, pretty much makes CDS obligations of that magnitude a crock of shit. Funny that the US poured so much money into AIG to cover theirs. That bailout preferentially covered some investors with tax money, but who? I'd love to see a breakdown of who had CDSs with AIG that were honored by the bailout.
–
smoorman1024 · 4602 days ago · link ·
Yeah I'd like to see that too but it is probably a pipe dream. I saw that stat earlier when I was searching and I couldn't decipher if those were CDS contracts on just mortgage backed securities or on all debt obligations.