CDS


CDS
Credit default swaps (CDSs) are financial instruments that act as insurance policies. By paying a premium, any institutional investor can insure itself against the default of a State or a company: in the case of default, whoever has sold CDSs (i.e. the policy) must compensate the loss by returning the whole capital to the investor. CDSs are, therefore, instruments which offer purchasers protection on their investment. For this reason the restructuring of Greek debt has created problems: since Greece did not formally default, CDSs were not triggered.
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