Virgle Kent borrows $50 from me. I want to get insurance on his debt in case he goes broke.
I go to Roissy and say, “Hey, Virgle Kent owes me $50. Can you insure that debt?”
“I’ll insure it if you pay me $4 a year,” Roissy says.
“Done!”
Roissy is betting that VK will pay me back, especially since he did his homework by looking at VK’s credit rating and saw it was superb. Roissy wrote me a credit default swap
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Credit Default Swaps For Dummies » Roosh V In search of a layman’s explanation of exactly WTF a CDS is, I googled “credit default swap for dummies” and found the above. The rest of this short article is worth the read if you also are looking for a greatly simplified explanation. |
