of the reference entity. There is no Netherlands Antilles case law or literature available which makes clear whether a CDS constitutes the conducting of insurance business under Netherlands Antilles law. Retrieved October 19, 2008. An interesting situation in which the inverse correlation between a company's stock price and CDS spread breaks down is during a Leveraged buyout (LBO). They generally pay a fixed interest rate and return the principal at maturity. "Should you be able to sell what you do not own?". A b c d e f g h Leonard, Andrew (April 20, 2010). CDS confirmations also specify the credit events that will give rise to payment obligations by the protection seller and delivery obligations by the protection buyer. Holm, Erik (November 21, 2008). If the investor actually owns Risky Corp's debt (i.e., is owed money by Risky Corp a CDS can act as a hedge.
8 CDS contracts on sovereign obligations also usually include as credit events repudiation, moratorium and acceleration. 30, no swaps had been cleared by the nyses London- based derivatives exchange, according to nyse Chief Executive Officer Duncan Niederauer. Nothing Lasts Forever Since market dislocations or " credit crunches " create the conditions for a negative basis trade to be possible, it is very important for the holders of this trade to be monitoring the marketplace constantly. The bank could sell (that is, assign) the loan outright or bring in other banks as participants. Retrieved April 23, 2010. To cancel the insurance contract the buyer can typically stop paying premiums, while for CDS the contract needs to be unwound.
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