Credit-default swaps got a bad name during the recent financial meltdown. But they are still being used, to the tune of about $26 trillion, despite the rhetoric in the media about how bad they were and their use by “greedy” bankers. Also, the major marketplace, called Markit Group Holdings Ltd., is owned by a group of banks. And this gets some criticism.
The real problem with credit-default swaps is that the market for the swaps index based on their data may not have been entirely accurate and thus perceptions of value may have been off during the financial meltdown.
All market-determining values being watched may not be trustworthy. Ironically, it seems credit-default swaps may have been even more accurate than many other major financial statistics we now rely on.
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