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credit default swap

(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.
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}
Related Words

Lynch swap 

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.
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.
Lynch swap by peculiargoldfish October 3, 2019

Gravy Swap 

The best crypto platform developed where you are able to swap $GRAVY for other cryptocurrencies
I just cashed out a million dollars because of Gravy Swap
Gravy Swap by GravyBoiii December 20, 2021
A swinger party held at the county fairgrounds where wives sleep with each other husbands for the night.
Hey girl, I can't wait the the geriatric international swap meat in April.
Swap Meat by Ranchgirls December 12, 2020

swap head 

"Yo, you a fine ass bitch, let's swap head."
swap head by Anythinggoes123 September 8, 2016
Bro did you see that sick video of Austin plop swapping Nicole, Jared was pissed.
Plop Swap by UnicornFarmer12 September 2, 2019
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pajama casual 

Pajama casual is a term used when working from home and preparing for a video conference. All business above the waist and your pajama pants down below.
We have a Zoom meeting in a few minutes and I’ll probably go pajama casual.
pajama casual by jrod-knows March 31, 2020
Word of the Day on October 14, 2026

funflation 

The recent boom in consumer spending on entertainment and experiences with a high demand running up the cost of enjoying of those experiences.
I’m trying to go to this Taylor Swift concert but the funflation has made it so impossible for me to afford tickets.
funflation by Dfree523 November 17, 2023
Word of the Day on October 13, 2026
A US deep south term for an alligator. Usually used in the Cajun dialect.
Take the big pirogue, I saw a huge swamp dog out there earlier.
swamp dog by Crystal Ambrose May 22, 2006
Word of the Day on October 12, 2026

Throat Sweats 

The feeling and build up in your mouth/throat of saliva that sometimes accompanies nausea.
Oh man those burritos gave me the throat sweats, I hope I don’t have food poisoning.
Throat Sweats by TacoFings420 April 23, 2024
Word of the Day on October 11, 2026
Being ignored by someone when making a statement or asking a question. Also known as blanked and turfed.
Person 1: Did u watch ** last nite?
Person 2:......
Person 3: O no u got aired!
aired by Pietro February 9, 2005
Word of the Day on October 10, 2026

piddlefart

Instead of doing my homework, I decided to piddlefart around for two hours.
piddlefart by Rene April 25, 2005
Word of the Day on October 9, 2026
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