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What is a Credit Default Swap and Why Should I Care?

Credit Default Swaps – A Primer

A credit default swap is a type of credit derivative. Credit derivatives “derive” their value from an underlying credit instrument; generally the bonds of sovereign nations or the bonds of a corporate entity. In recent years, credit derivatives have been created that are based obligations rather than entities; one common reference obligation are asset backed securities based on home equity loans.

A credit default swap is a contract that allows one to take or reduce credit exposure. The contract is between the two parties and does not directly involve the underlying reference entity. A credit default swap is essentially an insurance policy where one entity pays a premium to a second entity to take on the risk of a loss.

Let’s look at a fictitious example.

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Filed under business, Economics, election, Finance, Politics, public policy, Taxes

Obama and McCain – Where do they Stand on Immigration Reform?

You could be forgiven if you don’t know where the candidates stand on immigration. With the financial market meltdown in full swing and a full-blown media circus surrounding $150,000 shopping sprees and fair-weather fans, the press hasn’t had much time to talk about immigration. The Brookings Institution has published this fact sheet comparing the candidate’s plans that is worth reading.

So where do McCain and Obama stand on important features of immigration reform? As it turns out, despite what the ads would have you believe, not too far apart.

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Filed under election, Politics, Uncategorized