On Sun, Mar 22, 2009 at 5:25 AM, <[email protected]> wrote: > It's (1). They're not call liabilities in general. There are some people > trying to play a game called "commutation" (basically, settling CDS contracts > in cash today for less than they're worth, because you think that the insurer > is insolvent in the long term) but this can only happen with the consent of > both parties. > > best > dd
Thank you very much. Can you explain a little further? Don't they become "call" liabilities of the the condition they are guarding against happens. That is, if you have a CDS against a mortgage fund, if enough of the mortages go into default, don't they then become a "call" commodity? Like a life insurance policy becomes a "call" commodity if the insured person dies? Is it a matter of the conditions have not been met? Or is a CDS not that kind insurance? I know they were used as short bets as well as protection, but taking the protection example as simplest, how does one use a CDS to hedge against an investment going bad if it is not callable? Please note: I am NOT arguing. I am asking to have my ignorance corrected. I'll bet I am not the only one on this list who needs this point explained. Given your background, you may be the perfect person to answer this, if you are willing. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
