This article wrongfully states that investors are buying credit default swaps on Wall Street Banks to protect themselves. Realistically most credit default swaps are used as a speculation tool similar to shorting. The difference is that CDS markets have a lot less reliable liquidity and can easily be distorted by larger traders such as JP Morgan’s “London Whale.” Capital markets would be far better if all CDS traded on exchanges and were regulated in a similar fashion to other securities.
INVESTING IN THE FINANCIAL MARKETS INVOLVES RISKS. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS.