Abstract:

Credit default swaps has an unique function within the derivatives market which experienced fastly growth since 2000’s. This function can be summarized as providing insurance against the default of a sovereign or a private sector institution. The credit risk covered by the cds is not only the default risk, but also any risk incorporated in the legal documentation and signaling any financial impairment. The experiences of financial crisis during 2008-2009 necessitated to re-determine the procedures after the realization of the credit event. The effects of those new procedures revelaed during the quasi-default situation of Greece when the relevant cds transactions were to be finalised. The acknowledgement of the investors who take part in such transactions about what will be the proceedings they will receive has crucial importance in order for these cds transactions to be effective.

Keywords: