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The cost of insuring banks against credit defaults fell sharply.
And higher rates could spark credit defaults if Americans struggle with higher interest costs.
Several years ago, Berkshire sold derivative contracts tied to either the value of several global stock indexes or credit defaults.
Financial stocks were hit hard after analysts warned that the weakened economy could cause consumer credit defaults to rise.
But this state of affairs surely spells death for the market in sovereign credit defaults swaps (CDSs).
L&G lost £1.49bn in 2008 once £1.2bn worth of provisions for credit defaults is taken into account, and also cut its dividend by more than expected.
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No government agency regulates credit default swaps.
Think AIG and credit default swaps.
Credit default swaps are a prime example.
Credit default swaps are derivative contracts.
The first credit derivatives were fairly straightforward "credit default swaps" that transferred the credit-default risk of a single company.
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