Can you explain Credit Default Swaps?

Minimum amount to bet on Credit Default Swaps?

  • According to CNBC's website, it costs $54,000 to insure $10M of Switzerland's debts via Credit Default Swaps. The only problem is that I don't have $54,000. Would it be possible for me to enter CDS for $1M of debts or even $100,000 of debts instead? Thanks!

  • Answer:

    Of course not - credit default swaps are for institutional investors. Even if you had $54,000 you couldn't buy one. CDS are OTC derivatives. There is no exchange. When an investor wants to do one he has to find a counterparty and execute an ISDA trading partner agreement. Think there are any compliance people at any banks or hedge funds who would see your name on a counterparty agreement and not flip out?

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