CDS insurance

[AtW]

So now "insurers" say Greek's stuff (whatever it is) did not constitute default so no payout will be made

"The International Swaps and Derivatives Association (ISDA) has ruled that a "credit event" has not occured for Greece. "

http://www.telegraph.co.uk/finance/d...mmit-live.html

Should not even be legal to have such insurance.

[BrilloPad]

The credit agencies say it is default but ISDA does not? Looks like ISDA have been heavily leaned upon by IMF/ECB.

Though I am wondering if there will be a legal challenge.

[AtW]

The credit agencies say it is default but ISDA does not?

They are not related and who cares these days what credit agencies say?

[BrilloPad]

They are not related and who cares these days what credit agencies say?

France for one.

[Platypus]

So now "insurers" say Greek's stuff (whatever it is) did not constitute default so no payout will be made

That was always going to be the case. No one dare unleash the monster because no one knows who insured who and then re-insured and so on.

IIRC the amount of haircut was chosen carefully to avoid it being a default.

[AtW]

IIRC the amount of haircut was chosen carefully to avoid it being a default.

It's not a default because majority agreement was forced out of lenders. At least that's the line insurer lawyers will probably stick to ...

[Freamon]

So now "insurers" say Greek's stuff (whatever it is) did not constitute default so no payout will be made

"The International Swaps and Derivatives Association (ISDA) has ruled that a "credit event" has not occured for Greece. "

Debt crisis and EU summit: live - Telegraph

Should not even be legal to have such insurance.

You do know who the ISDA are, right?

[AtW]

You do know who the ISDA are, right?

Not until today, why?

[centurian]

They have said that a default has not yet occurred, because Greece has not yet failed to make a bond payment - only passed a law which indicates what they will do. Stating your intention does not place you in default - following through on that intention does.

It's a bit like writing a letter to your bank saying that you only intend to pay 30% of your next mortgage payment. You are not in default until your payment actually bounces.


So it buys everyone a couple of weeks to trawl through the small print and find some other clause to prevent a default from being declared.

[BrilloPad]

You do know who the ISDA are, right?

No - I had to look it up.

They have said that a default has not yet occurred, because Greece has not yet failed to make a bond payment - only passed a law which indicates what they will do. Stating your intention does not place you in default - following through on that intention does.

It's a bit like writing a letter to your bank saying that you only intend to pay 30% of your next mortgage payment. You are not in default until your payment actually bounces.


So it buys everyone a couple of weeks to trawl through the small print and find some other clause to prevent a default from being declared.

I found a good article here Gross Says ISDA Yet to Make Final Call on Greek Default-Swaps - Bloomberg

"the group will probably make one more decision on the issue."

"A swaps payout may still happen if Greece uses collective action clauses on private investors who refuse to take losses on their debt holdings, according to ISDA’s rules."

It does seem odd to me that those in the market seem to make up ISDA. Isn't there the possibility of market manipulation?