The media is failing again. In the case of AIG the pertinent factors can easily be explained yet I keep reading about how complicated it is and nobody saw it coming. The only reason AIG is in trouble ...
Credit default swaps (CDS) provide insurance against the default of a debt issuer. With a CDS, the buyer pays a premium to a seller for this protection. If the issuer defaults, the seller compensates ...
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What Are Credit Default Swaps?

Credit default swaps (CDSs) provide protection for investors in the event that the borrower defaults on their debt or loan.