CDS: bouncing back

Nicholas Paisner Is the credit default swap market due a renaissance? George Soros, for one, reckons credit derivatives should be banned. But CDS trading has so far survived the crisis, and market reforms are on the way. Along with history, that suggests a comeback is likely. In a CDS contract, the buyer pays the seller a fee to protect against default on a notional amount of a borrower’s debt – typically in increments of $10 million. If the borrower defaults, the seller pays up. It was losses...