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These were credit derivatives, which allow traders to bet on the perceived creditworthiness of corporations.
They focused on so-called credit derivatives, which allow traders to bet on the perceived creditworthiness of companies.
He expains: Italy's perceived creditworthiness is externally driven and it stands to reason that where Spain goes, Italy is likely to follow in the minds of most investors.
Similar(57)
Reputation, perceived risk, and trust vs. creditworthiness.
Specifically, the bank bought insurance against losses on corporate debt through credit derivatives that increase in value if the underlying creditworthiness of companies is perceived to have deteriorated.
The big ratings agencies like Moody's and Standard & Poor's have been pilloried since the onset of the financial crisis, with perceived conflicts of interest and flaky analyses marking them as ineffective watchmen of creditworthiness.
But looking beyond this auction, Spiro warns that Spain is in a terrible mess: The bank-focused bail-out is perceived as insufficient, a funding squeeze in the regions is putting more pressure on Spain's creditworthiness, non-stop austerity is increasingly seen as self-defeating and the recession is deepening.
For perceived advantage?
"Swaps are perceived as riskless.
Or, more accurately, perceived pressure.
That, and a perceived benefit.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com