What is a Credit Default Swap? | CDS | Credit Derivatives

[@nickush7512]

Wow !! Had to listen to that twice, a few hours appart, second time round at .75 playback speed... !! Solid as a rock dude, many thanks.

[@Akerfeldt77]

I appreciate you, Professor. Oh the things you can learn on KZbin. What a cool time to be a lifelong student.

[@kennyadvocat]

I miss these old videos. Taught me alot! =)

[@Hamboarding]

An update for the derivative videos would be very cool!

[@ljg3productions630]

Hey Patrick love your videos. I’m a finance major in college these types of financial derivatives are fascinating to me. I work at State Farm during the summer and hearing that two party’s with 0 insurable interest can engage in a transaction like this makes my head spin! Patrick I just bought a homeowners insurance on your house btw.

[@DataLog]

Thank you Patrick! You are a great source of more detailed information on the things I kinda know about but don't understand fundamentally. :) I know you don't really prefer trading, but I've incorporated some of your information on hedge fund strategies, risk management, and standard deviation and managed to earn some money by making trades with respect to deviation from the moving averages and hedging my positions with non-correlated assets. I made this comment because I wanted you to know that your insights can even help short-term traders (most of my trades are less than 3-4 days).

[@PBoyle]

Glad to hear you find them useful. I am a short term trader too, (5 min - 3 days) but 100% based on statistical models. I just don't recommend untested day trading strategies to viewers, as they run up transaction costs and taxes. Most people do not have the time to devote to short term trading and thus tend to do better with long term investments.

[@DataLog]

@@PBoyle I didn't know you also trade. I am always backtesting my models. I'm not into finances professionally, I'm a theoretical chemist, but I actually don't find it that difficult to predict short-term moves. However, my strategy so far has been that I literally tracked a single asset for a month, multiple hours per day to the point where I can make a move without any tools, and I just use tools to check myself. Since I'm obsessed with numbers in general I really didn't find it very difficult to find patterns, and I must say that I'm confused now as to why this is even possible when there are automatic algorithms that should beat the short term traders. But there is obviously some money to be earned by humans too (my brother is a programmer, so I hope that we will be able to take a larger slice of that cake in the future XD). Btw, the funniest thing of all is that I have the highest accuracy of predicting short-term trends in the crypto market (so far over 80%) both shorting and longing, which everyone deemed impossible to beat, but I'd say that it's the easiest market because of the highest proportion of inexperienced traders. Also, I find volatile markets easy to predict short term and difficult to predict long term, and just writing this down makes me want to slap myself, but that's how it is. But yeah, I agree that it takes way too much time, and so far, since my initial investment was small, the gains didn't justify my time, but I spent my extra time and earned extra money + learned a new skill, so it was worth it to me.

[@Hamboarding]

@@PBoyle ❤

[@Tas.hasan.]

I need a derivative based on this Man's popularity. I will long it to the moon.

[@Naseemtheking]

I’m here because I’m immature and I like learning.

[@SusieAspen]

"Sub-optional social behavior.."....I have to listen to this one a few more times...

[@exponentmantissa5598]

Sub OPTIMAL social behavior.

[@nanaasihene3177]

Thanks for the vid

[@davidguiney1746]

I just started a new job working in a clearing house for CDS and thought if Patrick can't explain it to me then I might as well quit.

[@chocolatemodelsofficial5859]

I gotta dumb this down to process it. In my mind CDS' were available for purchase, just like an options contract, sellers thought they were never gonna pay out. Oops the event took place, and they did have to payout but funds were lacking so the American people wrote that check. Casino capitalism at it's finest.

[@TeDynef]

Hello Patrick. Is there any way to buy cds products as retail customer? IE00BH057J13 and the other ones are the only one but they are hard to buy/sell for me because i have to call my broker because i am not official a professional. Also i want more.

[@MonkeySpecs301]

So many words, lol.

[@priyanshujames2300]

sometimes you look scary

[@regularfolks8285]

Democrats forced banks to make subprime home loans to borrowers who could not afford the house. Poor people were enabled to initially afford the home-loan by an adjustable-rate-loan. The monthly mortgage payment was low at first, but would rise significantly a few years later. Borrowers were instructed to refinance their loan just before the increase, enabled by housing prices continuing to rise and the homeowners' equity increasing. Eventually, house-prices stopped rising and poor borrowers could not refinance and defaulted on their home loans. Banks saw this coming from the start and did not want to suffer billions of dollars in losses when the subprime loans eventually defaulted; so each bank sold all its home-mortgage-loans in a bundle to investment-bankers, such as Goldman-Sachs, who sold them to investors. Investors also did not want buy a bundle of subprime home loans destined to default. Therefore, Goldman-Sachs created insurance-policies on these mortgage-bundle, investments. These insurance-policies are called 'credit-default-swaps'. The bond rating companies, such as Moody's, who are not government agencies, fraudulently rated the subprime-loan-bundle investments as AAA when in fact they were ZZZ. To lure investors, these insurance policies offered to not only pay any loss, but pay many times any loss, say 10-times loss. The insurance companies that issued these investment insurance-policies or 'credit-default-swaps' were not required by the Democrats to maintain money reserves to pay potential future claims, as is typical with other types of insurance. Thus, when housing prices reached a height to which no one could afford and peaked; poor homeowners, unable to refinance, defaulted on their subprime home-loans in the trillions of dollars, multiplied by the 10-times loss insurance; aggravated by insurers having spent a lot of the money on themselves on boats & planes & vacations; the insurance companies could not pay claims; resulting in bankruptcies like Lehman Brothers. In 2008, the government began using taxpayer money to begin making good the losses of the: banks, investment-bankers, and insurance-companies, and is still doing so today in 2022 in the tens of trillions of dollars, under the despicable euphemism 'Quantitative Easing". The Democrats recently printed $10-trillion dollars, half of which went to continue the bailout of the crooks on Wall-Street. This money-printing doubled the price of everything, overnight, crushing America's poor.__ __Fannie-Mae was always a government agency under the guise of a corporation, created by the government, initially financed by the government, staffed by the government, and bailed-out by the government, Fannie Mae's CEO was paid $100-million in salary & benefits. From the start, Fannie-Mae partnered in and enabled the entire Ponzi scheme upon the taxpayer. Yet, today, Americans continue to vote for the Democrats.

[@Hamboarding]

It was both Democrats and Republicans

[@blackoutgo2597]

Thomas Sowell goes over this is detail in "The housing boom and bust"