Greece on verge of breakthrough in deal to cancel 70% of debt

[AtW]

Rumour has it that 45% of greek bonds are now owned by hedge funds who are banking on CDS payouts.

[Freamon]

Absolutely - but if they have sold the CDS they are probably not bondholders? Doesn't the greek government negotiate with the bondholders?

They could be both. If you have some greek bonds and you want some more, but can't find any to buy, you could sell CDS instead, in an attempt to get the same risk profile. Obviously it hasn't worked out to be the same, but selling these CDS may have seemed like easy money a few years ago.

[AtW]

CDS should have been illegal in the first place - it's like it should not be posible to insure criminal acts or get guarantee of success: if it wasn't for this tulipy thing lots of schemes would not work because risk would have to be born by whoever got into it without any illusion of insurance making it suddenly AAA asset.

Perhaps any insurance related to financial instruments should be banned - plenty of money to be made in ripping off car motorists.

[Freamon]

CDS should have been illegal in the first place - it's like it should not be posible to insure criminal acts or get guarantee of success: if it wasn't for this tulipy thing lots of schemes would not work because risk would have to be born by whoever got into it without any illusion of insurance making it suddenly AAA asset.

Perhaps any insurance related to financial instruments should be banned - plenty of money to be made in ripping off car motorists.

CDS are illegal under the Life Insurance Act 1774. It's just not enforced.

[AtW]

CDS are illegal under the Life Insurance Act 1774. It's just not enforced.

Just like score of other sensible laws