CDS redesign that could
save bondholders from another Greece
radical redesign of credit default swaps (CDS) looks set to
save sovereign bondholders from the heavy losses imposed during
the recent Greek restructuring.
draft report, published on May 6, outlines a system designed to
ensure that CDS protection payouts reflect actual losses to
The redesigned CDS contract would
allow settlement based on the market value of whatever the
sovereign gives a bondholder in exchange for each old
bond, said Stanford
professor Darrell Duffie
and student Mohit Thukral
in the report.
market value would be determined in a settlement
Duffie and Thukral devised the innovative concept following
Greeces landmark debt restructuring in March. The
resultant exchange reduced the outstanding sovereign debt by
around 100 billion....