To swap is not to insure: Aaron Brown column

To swap is not to insure

aaron-brown-drybrush

“Buying naked credit default swaps is like taking out fire insurance on your neighbour’s house!” The phrase has been uttered with increasing regularity by embattled chief executives and politicians, but ignores the difference between insurance and hedging.

Insurance protects against damage to physical assets. By contrast, CDS protection buyers are not betting that the physical assets of a company or country will deteriorate, but expressing a negative opinion on the managers of those assets. If

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Register

Want to know what’s included in our free membership? Click here

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here