Hi Frnds,
Once i Was Reading NewsPaper,I found this word CREDIT DEFAULT SWAP
But I was Confused,During that time,
So, I surfed Internet a Lot and Finally Posting this Topic.
What is Credit Default Swap?
It is similar to Insurance ,if i am worried about DEFAULT.
Example:
Suppose I invested in Company's A bond.Lets Say my Investment is 10Crore Rs.
Also,I am Worried that,Company A may Default.
So,What Can We DO???
One Option is To Sell this Bond.
Other Option is enter into CREDIT DEFAULT SWAP.
Simply Credit Default Swap is Insurance Contract.
So,We Need a Company B ,which provides this Insurance.
I will pay monthly some Money(usually % of the Bond value) to Company B.
So,In Future if Company A is Defaulted,then Company B will pay my 10 Crores.
Once i Was Reading NewsPaper,I found this word CREDIT DEFAULT SWAP
But I was Confused,During that time,
So, I surfed Internet a Lot and Finally Posting this Topic.
What is Credit Default Swap?
It is similar to Insurance ,if i am worried about DEFAULT.
Example:
Suppose I invested in Company's A bond.Lets Say my Investment is 10Crore Rs.
Also,I am Worried that,Company A may Default.
So,What Can We DO???
One Option is To Sell this Bond.
Other Option is enter into CREDIT DEFAULT SWAP.
Simply Credit Default Swap is Insurance Contract.
So,We Need a Company B ,which provides this Insurance.
I will pay monthly some Money(usually % of the Bond value) to Company B.
So,In Future if Company A is Defaulted,then Company B will pay my 10 Crores.
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