Credit default swaps | Finance & Capital Markets | Khan Academy

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Introduction to credit default swaps. Created by Sal Khan.
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[@Steve_Takes]

Not for nothing this is great. I needed this as I'm reading "The Big Short"

[@kosaksipasapukazh]

+Durandisse84 Durandisse I too came from The Big Shor

[@adolfhilter]

+Durandisse84 Durandisse Me 3

[@arianopel]

+Durandisse84 Durandisse same here

[@MaanavKhaitanChannel]

Same here!

[@PINAKIDEY]

Same here lol

[@mastermindlord7901]

2020here and still watching this right after watching big short. Gives me straight information regarding the principle of financial fiasco in 2008.

[@animeeditor2714]

watching this in 2022 and was watching the big short but I left it in the middle as I was confused so I ended up here xd I realised this vid was 11 years old that's why its in 240p lol

[@abhishekrattan3508]

came right here after watching big short

[@captainobvious1415]

+Abhishek Rattan all over your keyboard??

[@abhishekrattan3508]

+General Sarasota hahaha...... nah not literally :)

[@dannysipos]

same bro

[@davecrupel2817]

Thats a nice shirt. Do they make it for men?

[@someguy6528]

Loool same

[@JA51592]

love how you dont waste time with unnecessary prologue and get right to the point!!

[@SkISl0pE]

Saw the Big Short, now I'm reading the book, and I needed this video to understand it! Thanks Sal!

[@captainobvious1415]

"Hey wait, wait, wait, AIG. You only have 100 billion dollars in assets, but you have insured 1 trillion dollars of other people's debts!" Lmao I laughed so hard at this.

[@utubewatcher806]

Wasn't as funny in 2008...

[@tannershep3311]

In the financial sector as a buyer do your research don’t go with the flow and do your own numbers and make your decision because somehow the lawyers found a way to diversify liability and at the end no one is at fault it is part of the game unfortunately

[@DIYDanCars]

@@utubewatcher806 By his example AIG is leveraged at 10:1, but back in 2008 some banks were leveraged 30:1. Talk about insanity!!!

[@fromwaydeep]

There's something shady going on...

[@kwrer6087]

fyi only...How MultiBank Group evolved into one of the largest online financial derivatives l.linklyhq.com/l/2JS #banking #finance #derivatives

[@MrLavinfx]

actually i was scare to learn about CDS but the way you explained it was so easy to understand, thanks a million.KEEP THEM COMING we are paying close attention

[@RioChandraa-xr2cp]

Clearly understandable, very clear & precise! Love it! Just realized it was posted 15 yrs ago... truly an heritage!

[@SamvitAgarwal]

This video was published at the perfect time

[@beatilcoheadsmith]

I'm doing research for an author and have needed to learn the entire sphere of the financial lexicon from scratch. This video is the best explanation on CDS's BY FAR that I have seen

[@excelisfun]

Sal, You are so amazing! Thanks for making it easy to understand! --ExcelIsFun

[@onion7568]

remember 13 years ago when people would sign off their youtube comments?

[@excelisfun]

@@onion7568 : ) : ) : ) : ) : )

[@Steve_Takes]

Well who the hell is rating Moody's ability to Rate!!!

[@starsareangels]

+Durandisse84 Durandisse No one. Same with Standard and Poor's and Fitch.

[@FlexSZN23]

Shareholders

[@seandafny]

Moody’s

[@the_real_economics]

You are as an investor, as a free-market participant. You are supposed to be a sane person - you either take into consideration Moody rating or disregard it. You are a private person making a decision with you money. When you make money it is your private profit, when you lose money it is your private loss. What is important that if something goes under, government and the FED are not supposed to step in and save your private losses with the taxes or inflation money.

[@shashankbharadwaj9678]

The US SEC in the US, FCA in UK, SEBI in India; basically your national securities regulator.

[@opufy]

how ironic this was uploaded right in the midst of the housing market crash that's why im here

[@donna8]

Sal....u are BRILLIANT! This was so clear. I totally understand CDS now. I have searched on the net for examples of what the heck they are...and you explained it so clearly here. Right...now onto the next video (I've watched about 5 today - they are addictive!)

[@jscanlan22]

Great job! Since, now even Greenspan admits that, markets are not self regulating. Who should we look to to set rules and regulations to govern these financial insturments?

[@MsMichaela999]

Absolutely love the khanacademy. Just when I though derivatives exam seemed pretty impossible, it all of a sudden all makes sense. God bless this lectures ;) Can you come and teach at our University?

[@songmin4453]

This presentation was the most wonderful I have seen! so simple to understand. Thanks a lot!!!

[@john.james-rambo]

Wish these old videos can be enhanced of Quality. 14 years later still helping everyone. Thank you guys.

[@epsonc882009]

Just watched "The big short", this is answered my question. Thank you!

[@canopeaz]

It's nice that this video was published right when the Financial Crisis happened 11 years ago.

[@jonschweer7494]

I have been in the fin markets since '73. I traded since 1987 in total OBIs so I got my scars. I have tried to explain it in layman's terms to my friends, found I had to back track often (and lost them in the story) but so far your C-D-1 made it clear to them. I will hit them tonite with C-D-2. Thanks for taking the work out of my hands.

[@jordanorta7476]

This dude saved me in college for chemistry, Microbio etc. Is there no limits to his brain!?

[@hammerhead19able]

Thank you. Explained in a way I can understand how all this works.

[@CameronCope]

thanks for this tutorial ! I have started to do research into how the banking/financial system operates & as soon as I came across the point if CDS's I felt like I was missing something - because it made very little common sense ! What I am seeing though, is that these systems are not based on common sense and what is best for all but rather what makes money for specific parties for limited amounts of time - no self-responsibility, no concern for the impact on others ! WTF?!

[@rodrigog.c.9407]

These videos are amazing. There's room for improvement in the aesthetics but other than that they're very eye opening. Thank you for sharing this knowledge for free.

[@InIt2winIt247]

Backhanded compliment!

[@watchergd8369]

I was surprised this video was made 13 years ago. My curiosity started to be solved thanks to that video

[@lawforever]

This guy is great in teaching us these diffucult subject. Awesome!

[@08Marina08]

Thank you so much!!!! Tomorrow I am writing a test and I didn´t get the whole thing about Credit Default Swaps... but now, it´s clear!!! Thanks!!!

[@orginunknown]

EXCELLENT JOB! this is how this stuff should be explained. dumbed without financial jargon thats meaningless to the layman. bravo.

[@JulioSoto1685]

Great explanation. Thanks for freaking me out.

[@georgeofhamilton]

I didn't know that Khan Academy was this old.

[@hassansaad6536]

Khan academy is even older than that !

[@snay6869]

Aged like fine wine

[@choozu]

Today I “got” The Big Short! 😍 Love you man... Subscribed

[@colonelburger]

Amazing clarification. Thank you very much for creating this. I am so angry at those Insurance Companies!

[@charizarduz]

Im just watching the big short right now, paused it to come here, thanks for making me feel like im not trying to read hieroglyphics!

[@bharati1986]

Brilliant stuff. had been trying to find reading material on this but kept getting consfused. this is so good! thanks!

[@FluffHead]

Awesome....Ive been trying to understand this and couldnt find any videos that made sense to me, but this video made sense. thanks

[@justincdotme]

thanks, now I can get back to watching The Big Short and actually understand it.

[@khanacademy]

I'll have to ask my wife :) I think she'd prefer that I stick to recording videos.

[@greatjoeblack2202]

Your explanations are very interesting, pls keep on

[@kennethmulongo6341]

I thought this video was great. Had no idea how CDS works but now I do. On top of that I also understand the massive risk with this! Thanks so much

[@deshn21]

You are one of the best teachers in the world

[@gc7304]

you make me understand the world man. thank you

[@adamafernandes9567]

"Pension fund.. Pension Fund.." love it!

[@NOREALESTATEINVESTORLEFTBEHIND]

What a great video explaining what I already knew but couldn't diagram out, thank you very much Sal, would love to be able to share this video on our KZbin channel

[@malthus101]

Excellent video, very clear now on what they are - I will watch your other videos! Thanks.

[@mavrick0ck]

thanks so much. this is such a clear tutorial on what a CDS is..

[@jonathanwood8847]

9:54 "you get insurance, you get insurance, everyone gets insurance!!!!!!"

[@jerwinbalicano5046]

I like how you convey the context without exploiting their nastiness

[@smclo03]

Excellent! I never truly understood CDS's before this video.

[@prakash2118]

Learning finance from you makes it very easy. Thank you sir🙏

[@ysfkfnd]

There are multiple issues with credit rating companies. 1. They rate the company situation at the present for a debt to be paid 10+ years from now; no commitments on any sides. 2. They are paid by the company being rated. 3. They have no liabilities if rating degrades over time. 4. A company's rating can be dramatically downgraded in 2 years from AAA to BB, for example.

[@JoseTorres-ry9qe]

Me watching this video after the US Bonds Treasury deranks from AAA to AA+

[@NavdeepSingh-bv3lv]

Lol this is a productive day for me. First the awesome Matt Damon narrated documentary, Inside Job, the the big short and then these vids. I love knowledge. ;)

[@DeeSee25]

Wow, this helps a lot. This makes a lot more sense now.

[@kuranescelephia1823]

Credit Sussy

[@Steve_Takes]

Holy shit, from 6:45 to 7:10 Nails it all together guys.... but you gotta be patient and watch from the begining

[@rj8954]

Very useful tutorial. Clear and easy to understand. Keep it going.

[@idally89]

Good explanation. Yet, do you agree about what some market commentators argue that unless there is a strict control of these credit derivatives what happened few years ago in 2007 may happen again?

[@vivs005]

Thank you so much for that. I'm a dummy so I didn't get anything from wikipedia or investopedia. But your video cleared it in once. Thanks a lot!

[@successmaharjan2906]

this is great. it totally help me to understand the credit default swaps.

[@PunmasterSTP]

Credit default swaps? More like "C'mon, this video rocks!" Thanks for another banger.

[@ashimdahalii1874]

cant believe its 15 years old

[@frenchsaber]

"Let's say I'm a pension fund" What the fuck is a pension fund? First sentence and I'm already lost

[@FlippersTF2]

banana aya playa just a fund that invests peoples pension money

[@GermBrit]

Great work on this video. You make everything so easy to understand.

[@blin7509]

Low interest rate is the problem. Now all these pensions can’t pay their obligations with interest income so they have to go out their ways to fund the payouts. No wonder Robert Kiyosaki wrote the book

[@pyaethein1699]

Nice explanation! It was easy to understand.

[@Alex-zz6vt]

Watch this years ago. But, this video is gonna get popular again in 9 month to a year

[@ispinola]

Credit Suisse CDS situation has me watching this.

[@JayRappa]

Another excellent, simplified explanation. I ask myself sometimes how moody's can hold such incredible power of companies and underlying securities.

[@bobroberts5074]

Best explanation hands down. Thank you

[@tamadawoo5676]

watching [the big short] now. good lecture.

[@flashfire201robloxlegosand8]

nice explanation. constructive critisim: script it next time!

[@thegrandfoundationchurchof7138]

Free online education. Must watch videos... Very Cool.

[@mikedelaney9669]

As a retail trader could you take out CDS on specific corporate bonds even if you have no insurable interest? Pure speculation from distance so to speak...

[@kennethsparks4824]

outstanding!!! Thanks Sal!!!

[@LeoLeo-sh4vm]

I'm always learning new terms in Wallstreetbets.

[@eletipraveenreddy]

This is very good and easy to understand

[@christophgouws8311]

You explain it so well

[@prathmeeshpwaliwandekar6760]

Fabulously explained. Thanks

[@mattfotsch5550]

You make it sound like the credit agencies couldn't do a good job. It is true they blew the MBS and CDO markets. However, they were quite accurate on ratings for everything else. Essentially, they had issues rating Mortgages and their derivatives mostly, due to the reasons you spoke about in your housing bubble section.

[@misao3004]

I love and hate how complicated the financial world is

[@ttijp153]

Pretty awesome!! working for insurance company then u will get incredible bonuses.

[@jaykay9433]

You are a good teacher my friend

[@peacefullbrown]

@Khan Academy: this is exactly the graphic resumy I was looking for CDS understanding! ;)

[@KarlaBarbacena]

If that is the structure, if I am Corp A or B with a low rating, I would just default entirely because I know that someone’s backing me up in case I default lol. If that’s the case, does it shift the liability from Pension fund to AIG?

[@duc9395]

Unreal videos. Good work!

[@Jdalio5]

After it collapses just remember to rince and repeat like the JIRMACK bottle says.

[@BettyRox0890]

Thank you soooo much!!! I have a test tomorrow and this was the one thing I just could not get. I was so confused! (@,@)

[@arisraz]

very helpful video.. help me finishing my term report. thank you ^_^

[@MatteNoob]

Very good explanation, Sal. I now see where the systemic risk they talk so much come from. I don't know if I think it is shady though. The one bit that is weird, is that it is the company itself that pays for the rating. One would think that the investor would have incentives to pay for a non partisan rating Are there regulations for who can own a rating company? For instance, can an insurance company like AIG own their own rating company and be rated by them? Are there rules for how to rate?

[@Kindafu]

Simone, have you ever heard of an "allowance for bad debts"? I think it is implied that that's what AIG would need to set up. Of course the wouldn't pledge every asset.

[@lordsoros2666]

An allowance for bad debt is a valuation account used to estimate the portion of a bank's loan portfolio that may ultimately be uncollectible. Lenders use the allowance for doubtful accounts method because the nominal value of a bank's total loan balance is not the actual balance that is ultimately collected, since a portion of the loans may default.

[@abhinavitsmebellamy]

Thanks for this. Great explanation!!

[@twentysixstrings]

Thank you very much for this excellent explanation.

[@kumaravelrajan]

Excellent. Just excellent.

[@kirstyadamson1]

really clear and useful thank you

[@BookofProverbs]

Wish I would’ve watched this before the big short lol

[@iamlegend4149]

Excellent explanation

[@kevinrandalrulach]

Great video. Well explained..

[@wrongnumber6]

thanks for making this so simple !

[@macallanvintage]

The credibility of CDS depends on the Credit Rating. How ethical, honest and accurate are the ratings agencies?