The EDS dustbin

The hype surrounding credit default swaps of ABS and loan CDS (LCDS) made me ponder whether these two new darlings of the Street will ultimately go the way of equity default swaps. Remember EDS? That heavily hyped must-do new product that was quickly consigned to the dustbin for financial innovations with no economic purpose.

My conclusion: LCDS is the real deal and will thrive. But unless ABS CDS undergoes a wholesale makeover, it will fade away after its current singular purpose is satisfied.


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