The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  Re: Will the Bailout Plan Work? Date:  10/5/2008  12:19 PM
Author:  WendyBG Number:  257740 of 539074

<Do the CDSs expire? Can the clock run out on them? >

A Credit Default Swap (CDS) is a private insurance contract between companies. Each one is for a specific period of time. Like a bond, which pays interest for a specific period of time, the CDS will produce an insurance payment for a specific period of time. They are traded in the market on the basis of the NAV (Net Asset Value) of the specific cash stream (the insured paying regularly, vs. the risk of default of the insured bond).

If no more CDSs were ever issued, the existing ones would eventually age out.

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us