Question: #1545

CDS and Financial Market

A survey by Fitch Ratings found that capital market participants felt that Credit Default Swaps, a form of derivative contract that pays off if the named underlier defaults on its debt obligations, are both more important as indicators of counterparty risk and a more important tool for managing counterparty risk than are other means, such as stock prices or credit ratings. Please comment and discuss. For example, what advantages or disadvantages of market-based indicators for making investment (bonds, loans, stock) decisions? 

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Solution: #1528

CDS and Financial Market

Credit Default swaps are popular credit derivatives used for protecting the buyer of the instrument against the risk of default or any of those events that are re...
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