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Markets for credit default swaps

ForexZig.com November 2, 2012
Credit_Default_Swaps

Credit default swaps

After considering the bond markets, the currency futures, we have to pay attention to  the swap markets. Could they be useful for defining the currency market movement?

This is a relatively unknown market, however, the credit default swaps, or CDS instruments could be great for showing long-term moods in different currencies.

Introduced and widely used over the past 14 years, credit default swaps are contracts that protect the position of the buyer against the potential credit event. For example, a money manager can insure the creditworthiness of $ 100 million in Japanese government bonds by paying a premium. In case of default or debt crisis, the money manager will be able to recover the value of his bonds. So, like currency futures, credit default swaps are a great way to show how bullish or bearish is a particular currency market.

As a conclusion, we may say that when used properly, all these market indicators that we described in the previous three articles, can add great confirmation of individual transactions, increasing the general income from investments. With the increased interconnectivity of the global markets in present times, it worths to realize the relationship between markets. The most important thing is that it helps investors to benefit in a higher extend from them.

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