Or Credit Default Swaps. These instruments are somehow considered as an insurance in case a specific event occurs. The buyer of CDS makes payments to the seller and in exchange he receives a big payoff if the seller fails to pay their duties (default). Obviously the higher the probability of default, the more expensive the CDS are.
So, in a sense, we may check out the price of the CDS to see if a certain institution, government, country... is likely to default.
If we compare current data from different European countries we see that Greek CDS are paid 401,020 euros per 10 million euros of exposure, which is a huge amount. Portugal has 162,500, and Spain 129,600.
2/2/2010
