Fanciful funding

Credit default swaps

"If I were a structured product investor and held a five-year, capital guaranteed product, which for the first few years traded on the secondary market with a bid-offer spread of 100 basis points (bp), and then soared to 1,000bp by the end of 2008, I would be livid," says one New York-based structurer. "These exceptional spreads have caused some investors to turn their backs on structured products altogether."

Structured products dealers' credit default swap (CDS) spreads had an extremely volatil