Credit default swaps

A credit default swap (CDS) is nothing but a gamble between two people that a company or an individual, not necessarily connected with them. will get into financial trouble. Sears, for instance, sells stoves on long-term credit. Some purchasers might not be able to pay. So Sears finds someone else willing to pay the purchaser’s debt in case they fail to pay, that is default on their loan hence the term “credit default.” Continue reading