Credit Default Traders Bet On Government Debt That Doesn't Exist

Shell Game

There’s a lot of misinformation and confusion in the markets when it comes to Eastern Europe, especially derivatives.

Apparently, some credit default swap (CDS) ‘investors’ even forgot to check whether there were any underlying assets behind their bets:

The Economist:

A good example of outsiders’ wrong views was the market in credit-default swaps on Estonian debt. This was a chance to trade bets on, in effect, the death of a non-existent horse, as Estonia has no publicly traded government debt.

Oops.

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