Credit Default Swaps

The Credit Default Swap has been discussed in the new great recession of 2008, leading to the capital market to be major protagonist in the collapse global because this instruments was used by a speculative reason which sought to attack the public debt of some countries such as Greece, but really ¿The CDS is the creative element in the new credit event?

Greek has taken steps to force holdouts of bonds in the private sector to participate in a restructuring that meaning it does not trigger payout on credit default swaps with one condition that the country need by to receive a first batch of money from a €130 billion bailout but this measure in the capital market has created concern that investors incur further losses swaps but that most swaps issuers appear to have hedged their risks, meaning the net payout would be relatively small; additionally securing market CDS Greek debt is small and the impact would be limited. This argument is true?

Raised earlier by arrangement, the investors would assume a loss of 53.3% compared with 70% loss and bonds offered in exchange for assets with a lower interest rate so this measure could be a great alternative to solve the recession Greek.

“the agreement voluntarily of debt” , seeks to banish the specter of default but not resolve the problem background of super tax debt. Greek must submit a savings plan but now has agreed to lock their accounts to ensure payment of debt and has transferred some of their sovereignty to the "troika; The social consequences of the agreement are to be seen, but say a period of no growth, which will maintain the low value of the shares and trusts depressed.

This measure only affects the private sector and excludes all debt held by the European Central Bank and other public authorities, also the banks as private institution should ensure his own good and not for the common good and for the banks is better have a “credit event” to activate the CDS to protect them from losses.