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CDS: Everything You Wanted to

Know about Credit Default Swaps

At this AEI event, two financial experts will outline opposing views. Mark C. Brickell, the CEO of Blackbird Holdings, a derivatives trading platform, and a former chairman of the International Swaps and Derivatives Association, will present the case for CDSs. R. Christopher Whalen, a financial analyst, consultant, and writer, will offer the case against these derivatives. Following the formal presentations, there will be a general audience discussion of the benefits or dangers of credit default swaps. AEI's Peter J. Wallison will moderate.


Credit default swaps (CDSs) have been cited as either a great advance in risk management or a source of systemic risk. They have been alternately described as no more complex or risky than commercial loans or as financial weapons of mass destruction. The CDS market has grown from almost nothing ten years ago to at least $25 trillion today, though critics say it is just a global gambling casino for hedge funds and other financial players. Legislation has been introduced in Congress that would limit the use of CDSs or force this over-the-counter market into a clearinghouse or an exchange. Despite all the heat generated by this market-based innovation, little light has been shed on how CDSs actually work and why they have attracted so much interest in the financial community.