Credit Default Swaps are back and that’s not necessarily bad.
They’re an insurance policy in the event the issuer of a bond or note defaults. They come in handy in volatile markets.
Credit Default Swaps make it easier to sell bonds and notes because traders, including hedge funds, are willing to deal and trade in them to facilitate the bond/note markets.
Of course Credit Default Swaps were the type of obligations that Bear Stearns and American International Group (AIG) and other meltdown victims had. They were just overwhelmed.
The securities’ reputation got sullied but in time will be repaired, as they ought to be. They are a valid and useful investment vehicle.
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