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Swap arrangements made by other insurers require payments only if a default occurs.
But because each contract must be settled between buyer and seller if a default occurs, this imbalance can present a problem.
If a default occurs, the party providing the credit protection — the seller — must make the buyer whole on the amount of insurance bought.
If a default occurs, the seller (the party providing the credit protection) must make the buyer (the party receiving the protection) whole on the amount of insurance purchased.
Those sorts of derivatives pay out money over time, whereas derivatives tied to a country's debt pay out on one occasion: if a default occurs.
"If a default occurs," said Mr. Wright, who grew up at Riverton and still lives there, "new owners will have to come in, probably with no connection to the community or its historical significance".
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But if you buy a credit-default swap on Monday from one firm, and sell an identical swap on Wednesday to another firm, you still face the potential of risk if the party that sold the swap to you is unable to pay when a default occurs, perhaps years later.
We don't know how the Chinese will react if their faith in Treasury securities is shattered by a default –- and remember, a default occurs the moment the precise terms of a loan are not met and either principal or interest is not paid exactly when due.
A default occurs when a country (or company) can't make a debt payment.
Second, he could pledge that, if worse came to worst, he would, once a default occurred, use his emergency powers to end it and save the nation and the world from catastrophe.
The prices for credit default swaps, financial instruments that pay investors in the event that a default happens, imply just a 0.05 percent chance, or 1-in-2,000, of a default occurring within the next year, according to The Wall Street Journal.
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