Can someone help… When you long CDS, do you sell ptotection or buy protection? When you are long on CDS, do you short credit risk or long credit risk? Not very familiar with CDS.
Long CDS - Buy Protection - Short the underlying credit instrument Sell CDS - Sell Protection - Long the underlying credit instrument
Long CDS ==> Long the Credit Risk ==> So sell protection
Which one is correct? Anybody else.
I’m sure I am…
Mumu is right… Buy a CDS…means your buying protection in case of default Short a CDS (insurance companies do)… means your selling protection
Long implies you pay money for something. In this case, you pay money to hedge against credit default risk. You just bought an insurance.
yeah mumu has it.
Thanks mumukada
Thanks mumukada.
chadtap Wrote: ------------------------------------------------------- > Mumu is right… > > Buy a CDS…means your buying protection in case of > default > Short a CDS (insurance companies do)… means your > selling protection we should get used to that. mumu is always right.
^^ lol! I sure as hell hope that theory is proven correct day after tomorrow!
Mumu, just how much better prepared than last year are you???
I simplify my idea of a long CDS as a long put on a bond based on credit risk, understanding that a CDS is not an option. It helps me conceptually. Do you think that could get me in trouble?