CDS Premia: View from the BofE
From the BofE
Credit default swap (CDS) premia for banks and securities houses — which provide a measure of the cost of insuring against default — rose sharply in February and early March (see picture below). CDS premia peaked around the time of the collapse of Bear Stearns, a US securities house. However, they have subsequently fallen back, perhaps in response to the rescue of Bear Stearns and the measures announced by various central banks around the world. In addition, many institutions have announced plans to raise new capital. That will strengthen their balance sheets and is therefore likely to have been a factor contributing to the decline in CDS premia. Nevertheless, the premia remain well above their pre-crisis levels, and are likely to stay elevated until the location and magnitude of financial losses is fully resolved.
May 14th, 2008 at 7:23 am
Sorry, I am french and I don’t understand something: what is a premia?
Thanks
May 14th, 2008 at 7:38 am
prime
May 14th, 2008 at 5:36 pm
The plural of “premium” is “premiums,” not premia or praemia or any other such silly, pretentious crap.
May 14th, 2008 at 7:07 pm
[...] levels well off its March highs, and back towards its lowest point of the year to date. Meanwhile, Alea is watching financial-instution credit default swap spreads decline to levels well off their March [...]