Irish CDS

[cr6196]

Just saw something in the FT...

it costs around 412,000 to insure 10m of Irish debt for 5 years, why couldn't you just buy the 10yr yielding just over 6% and bag the difference? i'm presuming the problem is the last 5 years but i wondered if there was anything else? is arbing CDSs done?

 

[Martinghoul]

Yes, it's most definitely done... Sovereign CDS, however, is a piece of sh1t product.

 

[cr6196]

hmmm, tbh that raises more questions than it answers, i'll just leave it just asking why sovereign CDSs are ****?

 

[Martinghoul]

'Cause it's a poorly defined contract... There's all sorts of legal games that can potentially be played to avoid payout.