In 2008, I was still in college. At that time, I heard from senior seniors who were about to graduate but my job was not settled. The university I went to was a major in logistics and shipping. It was a popular major when I applied for the exam.
China joined WTO at the end of 2001. The import and export trade volume showed geometric growth during that period. Related majors became popular majors. Not to mention that they would definitely get a high-paying position after graduation, but it is not difficult to find a decent job. How could seniors have a headache for finding a job?
It was later learned that the financial crisis broke out in the United States in 2008, and the global economy was seriously affected, and import and export trade was greatly reduced, and the logistics and shipping industry, which provides services for trade, was naturally in a dismal business.
What caused the crisis was the subprime real estate loans in the United States, and what made the crisis wider and eventually became a global financial crisis was an financial derivative tool called CDS.
In the past few days, the well-known investment bank Credit Suisse has pushed CDS to the public again. The price of Credit Suisse 's five-year CDS rose to 293 basis points, setting a historical high. Foreign media reported that even if a large investment bank goes bankrupt, the market suspects that Credit Suisse has a significant increase in the probability of CDS default.
So what exactly is CDS? Who will benefit from the crisis? This article will provide you with popular financial science.
is leverage plus an insurance, and you have money to make money together
CDS. The Chinese name is credit default swap. It is a financial derivative product born in the 1990s. Once it was launched, it was widely recognized by the market. You can make money by making money by doing this thing. The financial market likes to make money with "zero cost".
It is not easy to understand the operation logic of CDS. Let me give you an example.
Assuming that Zhang San lent Li Si 1 million yuan, Li Si will return 1.1 million yuan with the principal and interest one year later. If it goes well, Zhang San will earn 100,000 yuan a year, but he is worried that Li Si will not be able to repay the loan on time, so he found Zhao Liu. Zhang San gave Zhao Liu 40,000 yuan, and if Li Si pays back the money one year later, he will be at peace; if he doesn't pay it back, Zhao Liu will need to pay 1.1 million yuan to Zhang San for Li Si.
Zhao Liu knew that Li Si's father was a rich man. Even if Li Si had no money a year later, his father would make a hole for him, so he agreed to Zhang San's request.
A year later, Li Si gave Zhang San 1.1 million yuan on time. After deducting 1 million yuan in principal and 40,000 yuan paid to Zhao Liu, Zhang San's actual income was 60,000 yuan, while Zhao Liu made 40,000 yuan.
In the example, the transaction between Zhang San and Zhao Liu is CDS. Zhang San is the buyer of CDS and pays the fee, and Zhao Liu is the seller of CDS and charges the fee. Is
a bit like insurance? That's right, in my opinion, the essence of CDS is financial insurance, but the risk is much greater than that of insurance in the conventional sense. I'll talk about this later.
Zhang San tried the sweetness and planned to expand the scale of his lending business. With only 1 million yuan, he found 9 million yuan from the market (leverage) to make the total loan funds reach 10 million yuan.
9 million yuan was found from the market and interest needs to be paid. Assuming the annual interest rate is 3%, Zhang San will need to return 9.27 million yuan in the original profit after .
Zhang San divided 10 million yuan into ten 1 million yuan, each of which lent to people who need funds at an annualized interest rate of 10%. can receive 11 million yuan in a year. still contacted Zhao Liu to sign a CDS contract for the security of the funds, and paid Zhao Liu 400,000 yuan in "premium".
After a year, all the money was recovered. Zhang San's actual income = 11 million to 9.27 million to 400,000 = 1.33 million yuan. Compared with the capital of 1 million yuan, he made 330,000 yuan, which is much more than the 60,000 yuan he earned only in Li Si's one-order business. Zhao Liu, who sold CDS, was also very happy and made 400,000 yuan.
In order to make quick money, he can also find someone to take over CDS
Zhao Liu and Zhang San reached a CDS agreement. They did nothing and paid nothing. They made 400,000 yuan a year. Sun Qi from the next village was very envious, so he discussed with Zhao Liu to sell the CDS to him and was willing to pay 150,000 yuan.
For Zhao Liu, he could only get 400,000 yuan a year later and had to bear the risk of the debtor's default on the principal. After selling CDS to Sun Qi, not only immediately earned 150,000 yuan, but also got rid of the burden and agreed to the transaction. In 2008, I was still in college. At that time, I heard from senior seniors who were about to graduate but my job was not settled. The university I went to was a major in logistics and shipping. It was a popular major when I applied for the exam. China joined WTO at the end of 2001. The import and export trade volume showed geometric growth during that period. Related majors became popular majors. Not to mention that they would definitely get a high-paying position after graduation, but it is not difficult to find a decent job. How could seniors have a headache for finding a job? It was later learned that the financial crisis broke out in the United States in 2008, and the global economy was seriously affected, and import and export trade was greatly reduced, and the logistics and shipping industry, which provides services for trade, was naturally in a dismal business. What caused the crisis was the subprime real estate loans in the United States, and what made the crisis wider and eventually became a global financial crisis was an financial derivative tool called CDS. In the past few days, the well-known investment bank Credit Suisse has pushed CDS to the public again. The price of Credit Suisse 's five-year CDS rose to 293 basis points, setting a historical high. Foreign media reported that even if a large investment bank goes bankrupt, the market suspects that Credit Suisse has a significant increase in the probability of CDS default. So what exactly is CDS? Who will benefit from the crisis? This article will provide you with popular financial science. CDS. The Chinese name is credit default swap. It is a financial derivative product born in the 1990s. Once it was launched, it was widely recognized by the market. You can make money by making money by doing this thing. The financial market likes to make money with "zero cost". It is not easy to understand the operation logic of CDS. Let me give you an example. Assuming that Zhang San lent Li Si 1 million yuan, Li Si will return 1.1 million yuan with the principal and interest one year later. If it goes well, Zhang San will earn 100,000 yuan a year, but he is worried that Li Si will not be able to repay the loan on time, so he found Zhao Liu. Zhang San gave Zhao Liu 40,000 yuan, and if Li Si pays back the money one year later, he will be at peace; if he doesn't pay it back, Zhao Liu will need to pay 1.1 million yuan to Zhang San for Li Si. Zhao Liu knew that Li Si's father was a rich man. Even if Li Si had no money a year later, his father would make a hole for him, so he agreed to Zhang San's request. A year later, Li Si gave Zhang San 1.1 million yuan on time. After deducting 1 million yuan in principal and 40,000 yuan paid to Zhao Liu, Zhang San's actual income was 60,000 yuan, while Zhao Liu made 40,000 yuan. In the example, the transaction between Zhang San and Zhao Liu is CDS. Zhang San is the buyer of CDS and pays the fee, and Zhao Liu is the seller of CDS and charges the fee. Is a bit like insurance? That's right, in my opinion, the essence of CDS is financial insurance, but the risk is much greater than that of insurance in the conventional sense. I'll talk about this later. Zhang San tried the sweetness and planned to expand the scale of his lending business. With only 1 million yuan, he found 9 million yuan from the market (leverage) to make the total loan funds reach 10 million yuan. 9 million yuan was found from the market and interest needs to be paid. Assuming the annual interest rate is 3%, Zhang San will need to return 9.27 million yuan in the original profit after . Zhang San divided 10 million yuan into ten 1 million yuan, each of which lent to people who need funds at an annualized interest rate of 10%. can receive 11 million yuan in a year. still contacted Zhao Liu to sign a CDS contract for the security of the funds, and paid Zhao Liu 400,000 yuan in "premium". After a year, all the money was recovered. Zhang San's actual income = 11 million to 9.27 million to 400,000 = 1.33 million yuan. Compared with the capital of 1 million yuan, he made 330,000 yuan, which is much more than the 60,000 yuan he earned only in Li Si's one-order business. Zhao Liu, who sold CDS, was also very happy and made 400,000 yuan. Zhao Liu and Zhang San reached a CDS agreement. They did nothing and paid nothing. They made 400,000 yuan a year. Sun Qi from the next village was very envious, so he discussed with Zhao Liu to sell the CDS to him and was willing to pay 150,000 yuan. For Zhao Liu, he could only get 400,000 yuan a year later and had to bear the risk of the debtor's default on the principal. After selling CDS to Sun Qi, not only immediately earned 150,000 yuan, but also got rid of the burden and agreed to the transaction. The current situation is that Zhao Liu made 150,000 yuan and then withdrew. Sun Qi has the qualification to charge Zhang San 400,000 yuan in "premium" one year later, and bear the potential claims risk. as long as Zhang San's money is fully recovered, Sun Qi's net profit is 250,000 yuan (400,000-150,000 yuan) in a year. If Sun Qi also wants to make money, just find someone to take over CDS. Suppose Sun Qi sold 200,000 yuan on the day of buying, and deducted the 150,000 yuan paid to Zhao Liu, and obtained a net income of 50,000 yuan in one day. CDS market is similar to stocks, bonds, futures and other financial markets. It generates a large number of transactions every day. The scale of this market is not small. According to experts' calculations, the CDS market size when the US subprime mortgage crisis broke out in 2008 reached US$62 trillion. Li Si, Zhao Liu, Sun Qi and the players who later joined the CDS market seem to have made money. Is CDS really a perfect multi-win financial derivative tool? Risks and returns will always be with each other, otherwise the financial crisis in 2008 would not have occurred. Everything started with Li Si borrowing money from Zhang San. Everyone can make money based on Li Si's ability to repay on time. So what will happen if Li Si doesn't pay back the money? Zhang San bought "insurance". As the buyer of CDS, Zhang San, who paid the premium, would ask the opponent for money. Assuming that CDS is now held by Sun Qi, he will compensate Zhang San 11 million yuan as the final buyer . If Sun Qi has a strong family and can afford a compensation of 11 million yuan, then there is no big problem, but in most cases, Sun Qi doesn’t have that much money, and can only choose to go bankrupt and lie down. Zhang San’s “insurance” was bought for nothing, and cannot get the compensation and goes bankrupt. Don’t forget that Zhang San’s own funds are only 1 million yuan, and 9 million yuan was borrowed from the market, and the money in the market was lent to Zhang San by a large number of other investors. situation turned into the final money-using party Li Si defaulted on the contract. Sun Qi, who provided "insurance" for Zhang San, went bankrupt. Zhang San could not get the money and could not pay his debts and also went bankrupt. A large number of investors who lent money to Zhang San at that time suffered losses. If their money was also borrowed and could not be paid back, they would also go bankrupt. is leverage plus an insurance, and you have money to make money together
In order to make quick money, he can also find someone to take over CDS
Li Si and others suddenly couldn't pay back the money, the market collapsed, the crisis occurred
default incidents occur frequently, and countless bankrupt people are in number. We replace Zhang San, Sun Qi and other investors in the example with financial institutions. This is the financial crisis.
The United States was able to "turn the tide" back then, Switzerland does not have such strength
The inducing factor in the crisis was that Li Si, who borrowed money, could not pay back the money, but if Sun Qi could repay Li Si according to the contract, the crisis would not break out.
As mentioned earlier, CDS and insurance are very much in their desire, but not exactly the same. The difference lies in the strictness of supervision. The supervision of ordinary insurance is very strict. Insurance companies must provide sufficient mortgages to ensure extreme events occur, such as the fact that a large number of claims cases can still be paid when they occur.
CDS has no supervision. Sun Qi's family may not have much money but can buy and sell CDS in the market and act as an "insurance company". In fact, Sun Qi does not intend to hold CDS for a long time. He just wanted to make a difference. As a result, Li Si suddenly defaulted, and Sun Qi broke the contract before he could find the order to take over the dealer.
Isn’t finance a game of passing flowers by beating drums? When the market is good, you make money, I make money, and everyone makes money; when the market is bad, the person who takes over the market last bears all losses.
Credit Suisse is Zhao Liu or Sun Qi in the example. Although this century-old investment bank has a certain scale, it cannot be stopped if it breachs the contract with a large amount of leveraged CDS and really needs to pay all the compensation. The higher the transaction price of
CDS, the greater the possibility of default. This is easy to understand. Things that are not risky can be sold cheaply, and the greater the risk, the more expensive it is.
Therefore, Credit Suisse's five-year CDS price surged to 293 basis points, which gave the market reason to suspect that the investment bank may go bankrupt. As a frequent visitor to the world's Fortune 500 companies, one of the world's largest and most well-known investment banks. If there is a problem with Credit Suisse, it will trigger a chain reaction and endanger the stability of the financial system. The most recent time occurred in 2008.
At that time, Lehman Brothers went bankrupt and the financial crisis spread from the United States to the world. The US government took the means of taking over the "two-house" bonds, and used the US national credit to bring enterprises commercial credit and organized major financial institutions to invest funds to rescue the market to gradually stabilize the situation.
USD is issued by the US government. As long as the US dollar is printed, there will be no debt that cannot be paid. Therefore, once the US government takes action, it can "turn the tide". The situation in Switzerland is different. Although is a financial powerhouse and per capita GDP ranks among the top ten in the world, it does not have a large enough economic scale, Swiss francs is not the world's currency, and it has no strength to control the crisis. What should I do when
really arrives? It is useless to ask for help from EU , which is difficult for you to protect yourself, so you can only ask the United States for help. American capital does not have the fine tradition of helping others, and you will not take action without taking advantage of your illness and killing you. It is not impossible to have a low price. Don’t be surprised if Credit Suisse changes its name to American Credit one day.
or above is purely personal opinion. Welcome to follow and like @Wang Wu talks about . Your support is the best encouragement for originality!
At that time, Lehman Brothers went bankrupt and the financial crisis spread from the United States to the world. The US government took the means of taking over the "two-house" bonds, and used the US national credit to bring enterprises commercial credit and organized major financial institutions to invest funds to rescue the market to gradually stabilize the situation.
USD is issued by the US government. As long as the US dollar is printed, there will be no debt that cannot be paid. Therefore, once the US government takes action, it can "turn the tide". The situation in Switzerland is different. Although is a financial powerhouse and per capita GDP ranks among the top ten in the world, it does not have a large enough economic scale, Swiss francs is not the world's currency, and it has no strength to control the crisis. What should I do when
really arrives? It is useless to ask for help from EU , which is difficult for you to protect yourself, so you can only ask the United States for help. American capital does not have the fine tradition of helping others, and you will not take action without taking advantage of your illness and killing you. It is not impossible to have a low price. Don’t be surprised if Credit Suisse changes its name to American Credit one day.
or above is purely personal opinion. Welcome to follow and like @Wang Wu talks about . Your support is the best encouragement for originality!
