by Ericatect March 15, 2011
Get the SWTAP mug.(FINANCE) financial instrument in which buyer is someone who needs insurance against the possibility that a borrower will default on a loan. In that case, the counterparty is whoever receives the CDS premiums, and pays out in the event of default.
WHY IT'S BAD
Loans are usually made by either commercial banks (in which a loan officer is supposed to make a professional assessment of risk of default before handing over the money), or by investment banks (which underwrite securities like bonds). If the borrower has a high risk of default, then the loan should not be made--period.
Credit default swaps were a stupid method of supposedly turning a bad loan into a "risky" (and potentially high-yield) "investment"; they were in reality a strategy for fraud. Since portfolio managers knew they were bundling securitized loans that contained mostly crap, they would arrange credit default swaps and cash in when the borrowers defaulted.
WHY IT'S BAD
Loans are usually made by either commercial banks (in which a loan officer is supposed to make a professional assessment of risk of default before handing over the money), or by investment banks (which underwrite securities like bonds). If the borrower has a high risk of default, then the loan should not be made--period.
Credit default swaps were a stupid method of supposedly turning a bad loan into a "risky" (and potentially high-yield) "investment"; they were in reality a strategy for fraud. Since portfolio managers knew they were bundling securitized loans that contained mostly crap, they would arrange credit default swaps and cash in when the borrowers defaulted.
What the bankers hit on was a sort of insurance policy: a third party would assume the risk of the debt going sour, and in exchange would receive regular payments from the bank, similar to insurance premiums. JPMorgan would then get to remove the risk from its books and free up the reserves. The scheme was called a "credit default swap," and it was a twist on something bankers had been doing for a while to hedge against fluctuations in interest rates and commodity prices.
{Newsweek, "The Monster That Ate Wall Street," 27 Sep 2008}
{Newsweek, "The Monster That Ate Wall Street," 27 Sep 2008}
by Abu Yahya July 17, 2010
Get the credit default swap mug.a strategy in algebra in which if x/y=z, then y and z can be quickly "swapped" so that x/z=y. Very helpful for quickly solving for a variable.
Named after Mr. Lynch, a Floridian calculus teacher.
Named after Mr. Lynch, a Floridian calculus teacher.
Student θ: Ugh... solving 3/x=4 for x is going to take me like a bajillion steps.
Mr. Lynch: lol just Lynch swap 4 and the denominator x.
Mr. Lynch: lol just Lynch swap 4 and the denominator x.
by peculiargoldfish October 3, 2019
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Get the Gravy Swap mug.Vince Staples is a rapper from Long Beach, California. Formerly associated with the 2NGC Crips and Odd Future rap collective, Vince is one of the hottest young rappers in the game. He's known for his album Summertime 06 and Shyne Coldchain mixtape series.
Vince Staples is the best rapper out the LBC since Snoop. Coldchain the hottest thang bumpin out the city!
by Colt Donovan March 4, 2016
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Get the Swapmeet Girl mug.A swinger party held at the county fairgrounds where wives sleep with each other husbands for the night.
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