Use cases for credit default swaps | Finance & Capital Markets | Khan Academy

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How credit default swaps can be used as hedges, insurance or side-bets. Created bySal Khan.
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Finance and capital markets on Khan Academy: Interest is the basis of modern capital markets. Depending on whether you are lending or borrowing, it can be viewed as a return on an asset (lending) or the cost of capital (borrowing). This tutorial gives an introduction to this fundamental concept, including what it means to compound. It also gives a rule of thumb that might make it easy to do some rough interest calculations in your head.
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[@gsti1985]

Shortest and best video I’ve seen that explains a complex instrument in such a simple manner. Way to go SK!

[@digital-motor]

this is great and so easy to consume, thank you so much!

[@SalsaTiger83]

Can you do a video on the black-scholes equation and maybe even how to derive it?

[@selimunver20]

I dont realy get one part, why does the investment banker wants to insure the cdo? arent these obligations in these cdo's insured by their mortgages? so if the borrower/home owner defaults, the investment banker can seize the house?

[@mandeepvratesh4702]

Maybe because of the recovery value of underlying mortgage

[@dumbledoornguyen5966]

Or perhaps they sell their debt to Fannie Mae to collect double premium

[@flyguy0765]

I'm guessing probably for liquidity. Homes can be difficult/a long process to sell, meanwhile an insurance payout is pure cash

[@timothyharshaw2347]

It's basically insurance on investment capital/insurance against the risk of loss of money as opposed to insurance on a physical asset.

[@benren747]

They get a small maybe 1% fee from the pension fund 100 basis points

[@420hassam]

do videos on synthesis of INSULIN.....biotechnology