Selling Credit Default Swaps on Sovereign Debt

Quote from vickpr:

Please trust me when I say that I work in the derivatives industry and have an educational background in it as well. I just don't know much about the CDS world...
More...

Quote from vickpr:

Can I open a "Hedge Fund", get a prime broker account (I don't even know if I have enough money to get one of these) and then sell CDS? Anyone know anyone at a bank who I can talk to and figure out how much I will have to put up, and how much in notional I can sell?
More...

I can't reconcile these statements. Someone with a passing interest in the financial news would know more about the product and be less indignant when questioned about their absolute naivete.
 
Maybe you aren't getting the point.... but selling puts on bonds are effectively the same risk position + similar return profile. There are a lot of ways to earn 30 bps a year on some huge notional number, for events which probably won't happen. If Warren Buffets' equity put position excites you, you can emulate it with extreme ease.

Note that Buffet didn't put on his position with the idea of necessarily booking those annual premium as profits, but rather because he is always willing to accept up-front cash with the intent of growing that capital faster than market expectation through canny investments. If your best business idea with your dads $200k is to sell CDS... then you really aren't in his category.
 
Quote from heech:

Maybe you aren't getting the point.... but selling puts on bonds are effectively the same risk position + similar return profile. There are a lot of ways to earn 30 bps a year on some huge notional number, for events which probably won't happen. If Warren Buffets' equity put position excites you, you can emulate it with extreme ease.

Note that Buffet didn't put on his position with the idea of necessarily booking those annual premium as profits, but rather because he is always willing to accept up-front cash with the intent of growing that capital faster than market expectation through canny investments. If your best business idea with your dads $200k is to sell CDS... then you really aren't in his category.
More...

I agree with Heech that the OP is looking to sell vol rather than replicate the payoff of the CDS (delusional aspect aside).
 
"Maybe you aren't getting the point.... but selling puts on bonds are effectively the same risk position + similar return profile. There are a lot of ways to earn 30 bps a year on some huge notional number, for events which probably won't happen. "

I appreciate this and Martin G's input, this is excellent advice and I am not out $2,500 plus a weekend. What you guys are saying quite eloquently is that you "can sell puts on bonds" on monday with the same risk profile, sounds good to me!:)
 
You can trade CDS without an ISDA. But they will generally be in a note form and cash secured. Most private banks will offer it, but you will need to do about 2-5MM notional and your account will have to be larger (for KYC and ensuring it's an appropriate trade for you).
 
Quote from newwurldmn:

You can trade CDS without an ISDA. But they will generally be in a note form and cash secured. Most private banks will offer it, but you will need to do about 2-5MM notional and your account will have to be larger (for KYC and ensuring it's an appropriate trade for you).
More...


Bowo is gonna be all over that! :)
 
Quote from newwurldmn:

He could arb them with his knowledge of logarithmic zero prices.
More...

That, or the statistical arbitrage models I have, or my price physics trend following algorithms. Either way, if there was enough of a history, it would be possible. One off customizable risk instruments usually do not have any data, so that's probably the problem.
 
You must log in or register to reply here.
Back
Top