Credit default swap
Business Concept
Buffett's Berkshire Hathaway profit triples...compared with an $US880 million loss. Credit-default swap contracts, in which Berkshire protects clients from bond losses, posted a $US1.44 billion profit compared with a loss of $US342 million. Buffett's firm was required to post about... In this article: Berkshire Hathaway, Warren Buffett, Derivative, NetJets, Standard & Poor's, Burlington, Credit-default swap, Income, Recession, and Burlington Northern Santa Fe Corp. |
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Seeking Alpha | July 27, 2009
VIX Watching: Flat as a Pancake Again?
...hit a low of US$47.41. There was even a mini-panic in March this year that Berkshire Hathaway (BRK.A), Buffett's investment vehicle, might be going bust, when its credit default swap spread hit over 5% per annum. Now he's sitting on a...
In this article: Warren Buffett, Income, S&P 500 index, Goldman Sachs, Berkshire Hathaway, and Europe
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Too Early to Buy Anything? Do The Contrarian Contango
...how was the play? Credit default swap risk premiums now tell you that it is much riskier to invest in Warren Buffet's Berkshire Hathaway (BRK/A) than Vietnam, and that Russia is a safer bet than General Electric (GE). The Dow is headed for...
In this article: Republic Services, Dow, Texas Instruments, Balance sheet, Revenue, General Electric, and Contango
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Yahoo! News | August 20, 2007
Countrywide's credit default swaps tighten 63 bps
...parts of Countrywide Financial. Credit default swap spreads on Countrywide Home Loans narrowed to about 397 basis points, down from about 460 basis points on Monday, according to data from CMA DataVision. Citing unnamed investors, the...
In this article: Countrywide, Warren Buffett, NEW YORK, Reuters, and The Wall Street Journal
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L.A. Times - Money & Company | January 28, 2009
More moves afoot to rein-in credit default swaps
...to rein-in credit default swaps Credit default swaps have come to look like the premier "financial weapons of mass destruction" that Warren Buffett has warned about, referring to derivative securities. Swap bets gone awry helped bring...
In this article: Derivative, Warren Buffett, American International Group, Wall Street, and Washington
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GE, Goldman Bond Spreads: Unrealistic and Unsustainable
...risk. But bond traders in the US marketplace are obviously unwilling to accept that credit default swap spreads should be playing an integral role in determining yields for longer-dated General Electric and Goldman Sachs maturities. To...
In this article: General Electric, Wells Fargo, Lloyd Blankfein, Goldman Sachs, Wachovia, Nokia, and Derivative
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MarketWatch | October 01, 2008
As more firms struggle to borrow, support for bailout spreads
Credit default swap spreads on GE Capital debt widened by more than 100 basis points to almost 700 basis points on Wednesday, before narrowing after GE unveiled its deal with Buffett, according to Credit Default Research. , , ) said...
In this article: General Electric, Weyerhaeuser Co., GE Capital, Warren Buffett, Dow Jones Industrial Average, Wall Street, and Dell Inc.
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New York Times | March 21, 2009
Editorial Notebook: The Recession, for Fun and Profit
I realize it must feel somewhat strange to be taking financial advice from the people who brought us the collateralized debt obligation and the credit default swap, those "financial weapons of mass destruction," in Warren Buffett's parlance.
In this article: Recession, Goldman Sachs, Warren Buffett, Collateralized debt obligation, Merrill Lynch, Jpmorgan, Barack Obama, and New York
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Rolling Stone | October 20, 2008
Head Fake in Colorado? : Rolling Stone : National Affairs Daily
I hadn't heard that either. From what I understand, the cause of the problem was Mortgage-backed Securities and these Credit Default Swap thingies (which Buffet called 'instruments of mass destruction'). What does Buffet have to do with...
In this article: Warren Buffet, Mel Gibson, Tax, Steve Jobs, Colorado, Waste, Sterns, and Fidelity
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U.S. News & World Report | February 12, 2008
5 Reasons Why Buffett Can't Rescue the Bond Market - US News and World Report
...negatively. Credit default swap spreads on bond insurer debt widened in the hours after the plan was announced, indicating that investors perceive the plan as having made bond insurers more-not less--risky, Backshall explains. It makes...
In this article: Warren Buffett, Income, Cash cow, Derivative, Toxic waste, Comptroller of the Currency, John Dugan, and Ambac
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More on Credit default swap
Description from Wikipedia:
A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument -- typically a bond or loan -- goes into default (fails to pay). Less commonly, the credit event that triggers the payoff can be a company undergoing restructuring, bankruptcy or even just having its credit rating downgraded.
CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the events specified in the contract occurs. However, there are a number of differences between CDS and insurance, for example:
* The buyer of a CDS does not need to own the underlying security or other form of credit exposure; in fact the buyer does not even have to suffer a loss from the default event. In contrast, to purchase insurance, the insured is generally expected to have an insurable interest such as owning a debt obligation;
* the seller need not be a regulated entity;
* the seller is not required to maintain any reserves to pay off buyers, although major CDS dealers are subject to bank capital requirements;
* insurers manage risk primarily by setting loss reserves based on the Law of large numbers, while dealers in CDS manage risk primarily by means of offsetting CDS (hedging) with other dealers and transactions in underlying bond markets;
* in the United States CDS contracts are generally subject to mark to market accounting, introducing income statement and balance sheet volatility that would not be present in an insurance contract;
* Hedge Accounting may not be available under US Generally Accepted Accounting Principles (GAAP) unless the requirements of FAS 133 are met. In practice this rarely happens.
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