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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 464872  
Subject: Re: Will the Bailout Plan Work? Date: 10/5/2008 12:19 PM
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<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.

Wendy
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