“Standard” Credit Default Swaps on Greece Are a Sham and It’s Not a Surprise

Source: http://www.tavakolistructuredfinance.com

At least it’s not a surprise to any financial professional that has paid attention to the false reassurances that the International Swaps and Derivatives Association, Inc. (ISDA) has given over the years to naïve participants in the credit derivatives market.

“Customers” that accepted ISDA documentation when buying credit default protection on Greece are now discovering that ISDA defends the position that a 50% discount on Greek debt is “voluntary” and therefore not a credit event for credit default swap payment purposes according to its documents.

This makes the ISDA “standard” credit default swap (CDS) ineffective as a hedge for the widened

spreads (reduced price) of Greek debt, and it makes it ineffective as a protection against default using reasonable standards of impairment to define default. ISDA can defend ambiguous definitions so that payment on the credit default swap is virtually impossible.

Link to the report is here for rest of the article.