CDS

Subprime Mortgage Crisis Solutions Debate - Regulation - Derivatives Regulation
... such as credit default swaps (CDS) can be thought of as insurance policies that protect a lender from the risk of default by the borrower ... CDS can be used to hedge or can be used speculatively ... The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $4 ...

Subprime Mortgage Crisis Solutions Debate - Regulation - Derivatives Regulation - Arguments Against Regulating Credit Derivatives
... For example, the cost of providing CDS protection for particular bonds is a signal regarding the risk of those bonds ... CDS also allow particular credit risks to be hedged, as an entity can purchase protection from many sources of credit risk, much like an insurance policy ... While total notional value related to CDS are enormous (estimated between $25–$50 trillion), the true exposure related to that notional value is approximately $2.5-$3.0 ...