Credit Default Swaps and Trade

During one of my research efforts in support of a different post, I came across this JP Morgan (JPM) position piece (circa 2004) attempting to convince participants in trade transactions how useful CDS contracts might be.  Please click here and read it.

This nonsense is just one example of how far the industry is willing to go to promote “financial innovation”.   The CDS market is unregulated and apparently unlimited in its suggested applications.  It’s out of control and we are all at its mercy.

Comments

[James Cullen:]

I agree it's a little ridiculous to start pushing CDS protection on exposures involving receivables, but it isn't entirely bogus - maybe if you compare the financing costs of nonrecourse receivable financing relative to a short-duration CDS, you could get a better idea if there's some arbitrage or value creation in the process...

2008 Aug 26 08:21 AM