Discuss credit default swaps and effects it had on crisis

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Reference no: EM131301473

Discussion "Lean Enterprise"

What are the potential benefits of lean within healthcare? What are the dangers?

Please respond to the initial question by day 5 and be sure to post two additional times to peers and/or instructor by day 7.The initial post by day 5 should be 75 to 150 words, but may go longer depending on the topic.If you use any source outside of your own thoughts, you should reference that source.Include solid grammar, punctuation, sentence structure, and spelling.

Discussion "Global Economic Crisis"

• Question A

Read the "Global Economic Crisis" story on p. 212. Discuss the credit default swaps and the effects it had on the financial crisis.

Story Page 212

The Global Economic Crisis

Insuring with Credit Default Swaps: Let the Buyer Beware!

A credit default swap (CDS) is like an insurance policy. The purchaser of the CDS agrees to make annual payments to a counterparty that agrees to pay if a particular bond defaults. During the 2000s, investment banks often would purchase CDS for the mortgage-backed securities (MBS) they were creating in order to make the securities more attractive to investors. But how good was this type of insurance? As it turned out, not very. For example, Lehman Brothers might have bought a CDS from AIG in order to sell a Lehman-created MBS to an investor. But when the MBS began defaulting, neither Lehman nor AIG was capable of making full restitution to the investor.

Please respond to the initial question and be sure to post two additional times to peers and/or instructor.The initial post should be 75 to 150 words, but may go longer depending on the topic.If you use any source outside of your own thoughts, you should reference that source.Include solid grammar, punctuation, sentence structure, and spelling.

Reference no: EM131301473

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