The Troubling Impact of Credit Default Swaps on Europe's Banks.
Credit default swaps (CDS) are derivatives that offer insurance against the risk of a bond issuer not paying their creditors. The CDS market is worth around $3.8 trillion, but the market is well below the $33 trillion of its heyday in 2008. The biggest CDS market is for governments. CDSs were one of the financial instruments at the centre of the 2008 financial crisis. The current turmoil does not reflect a steep drop in the value of the securities that underlie the CDS.