Counterparty Risks in Credit Default Swaps

Posted by Tim Hope on 4/28/08 10:08 am

The outstanding volume of credit default swaps rose from $34.4 trillion in 2006 to $62.2 trillion by the end of 2007.  Credit default swaps can be thought of as insurance policies against default.  Yet any insurance is only as good as the company backing the policy.  It may be safe to say that the growth and interrelationships of such swap contracts may hold the potential for unforeseen consequences should they not perform as anticipated.

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