Credit default swaps 2 | Finance & Capital Markets | Khan Academy

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Systemic risks of credit default swaps. Financial weapons of mass destruction. Created by Sal Khan.
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Опубликовано:

15 окт 2024

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Комментарии : 376

@HonkeysRule 8 лет назад

I've been watching like 10 straight videos from this same person and I would just like to say the way he explains things and breaks things down is amazing and really worth watching I can learn very easy and quickly difficult topics when he teaches them

@floriankramer5835 5 лет назад

Agreed!

@amald9702 5 лет назад

Who's this instructor??? someone knows his name? like how can we address him suggestions/questions??

@meinbherpieg4723 4 года назад

@@amald9702 Sal Khan... as in Khan Academy

@NhanNguyen-pq5xc 4 года назад

@@meinbherpieg4723 and now Khan Academy is one of the most famous online learning platform in the world

@misterchartreuse8920 8 лет назад

This should be taught in school.

@BenJRiepe-vm1kt 5 лет назад

Mister Chartreuse it really should

@matheusg289 5 лет назад

That's what Kyiosaki os trying to say.

@hanspetermouritzen3699 4 года назад

It is

@COD10410 4 года назад

it is but I didn't understand so i watched this and now I do lol

@seandafny 4 года назад

Well here it is

@prabuddhadas935 5 лет назад

I am watching this video to get a better grasp of the movie The Big Short 😅

@pioneercolonel 4 года назад

Me too. I guess Murray would be H1 and I2 would be Goldman Sachs.

@paoval7369 4 года назад

Same here bro

@ankitagrawal7556 4 года назад

Wow 😃 same here dude

@angelreyesiii1250 4 года назад

lol me too

@haldein7049 4 года назад

🙋🏾‍♂️🙋🏾‍♂️🙋🏾‍♂️

@tendar6666 7 лет назад

I was trying to understand movie called “the big short”. I have watched movie 3 times, I didn’t understood, watched 3 videos explaining big short in RU-vid and still confused, all of sudden khan academy videos comes up, I was like ok.. but the way you described is very much easy to understand. I loved it

@andis9076 5 лет назад

Me2

@arnav4174 3 года назад

Man if you can’t understand a movie like big short, this stuff ain’t for you...

@tendar6666 3 года назад

@@arnav4174 now I understood hehe

@notallthatbad 6 лет назад

Ok, so, I'm a beginner to this whole complex idea and I gotta say - your explanation totally nailed it. You are a really, really good teacher. I appreciate the simple explanations which include examples, not just more jargon I'm somehow magically expected to know.

@SnoozeDog 4 года назад

crazy when you realize this video was made in 2008..

@jomango1929 3 года назад

why ?

@katherinejohns9974 3 года назад

@@jomango1929 2008 financial crisis

@doom2avatar 3 года назад

Even creepier when you realize that the series started with mortgage backed securities in late 2007.

@ajitkumar5670 3 года назад

@@katherinejohns9974 XCCVXCCXXXVXXXXXXCXZXXXXXVXXZXXXXXX

@onward10000 12 лет назад

The 7 dislikes were hedge fund managers...

@Ivan-zg7rl 3 года назад

Hahahahah i cry 😂

@laraschupfer6826 3 года назад

Hhaahahahha I‘m dying 😂

@cash4gnumber1c4g7 2 года назад

Nope he mixed up I2 and P2 ... P2 was insured by I1 not I2

@mehulkaps 2 года назад

Haha I cried laughing 😂

@vaishalirama Год назад

🤣

@seshagiriraoedupuganti2177 2 года назад

Why you removed finance and market from khan academy.?if possible restore these sections

@shakaama 16 лет назад

i understood and liked the video, but you do make leaps in your vocabulary that one has to overcome and infer upon oneself.

@anarikgonzalez2682 6 лет назад

This finance products will be better called "Rating default swaps"

@cuongchu1482 5 лет назад

That's even better than what I learned from Master Degree. You are awesome, mate :)

@muhammedyasinkalender6576 Год назад

Right? teaching has to be considered a difficult job already everywhere in the world. Better teachers, better understanding thus better educated society... ultimately a better world

@APUSHstudent777 2 года назад

Thank you for explaining that so well. This video will become popular again in the coming year.

@VigilanteNighthawk 15 лет назад

By far, this is the best explanation of CDS I have seen, and it has clarified a great deal for me. Thank you.

@shubhamkokul9 8 лет назад

just saw the big short movie now I know from where did they wrote their script with perfect numbers

@usamazafar5063 6 лет назад

Micheal Lewis wrote a book and then a movie was shot

@mickcv4554 5 лет назад

How did the guy make money though because with a swap your basically just insuring your loan so if it defaults you just don’t lose your money. I think maybe he took out a default swap on other companies loan. So company A loans B a billion and berry’s hedge fund take out a swap on company A’s loan even though he has nothing to do with it. Be like your friend taking out insurance on your house haha

@sladams9146 5 лет назад

I've been trying to figure out caused the 2008 crash. This man explains it very well. He's excellent.

@SteadyHaze 16 лет назад

I haven't watched this finance series..But I gotta say, you are the man..You harbor so much knowledge...

@jasmeetsamra9174 3 года назад

3:57, that's what changed the world. Great video, sal.

@wenzhaowei6008 4 года назад

Amazing videos . That is so brilliant and you may replace many professors in my college !!!

@tanjaw3402 6 лет назад

Your explanations are amazing and work on people 100% ! Thank you

@claytonolvera1869 Год назад

Amazing. All of your vids are coming true in 24 to 48 months. If not soones.

@shakaama 16 лет назад

you know what your video is more awesome than i thought. i completely understood fast money tonight. except for the part where they went into the g7 conference for injecting liquid cash directly to non-financials. whatever that means.

@chavo2008x 4 года назад

Who’s here after “The big Short”?

@paoval7369 4 года назад

Here dude!

@angelreyesiii1250 4 года назад

lol me

@siricharoen609 4 года назад

Me 😂

@PunmasterSTP 2 года назад

Swaps 2? More like "Super information for you." Khan Academy being great as always. Thanks for sharing!

@lordkoos 13 лет назад

Thanks much for your explanations, makes it very easy to understand.

@somyaprasad520 4 года назад

Thank you this video has cleared my concept. What happen to investor when it defaults ..is it something investors will be on risk of loss , When insurance companies downgrade with their ratings?

@xavierxon 6 лет назад

very well explained. !!! and was quite a fun to learn the complex things so easily by the way he explains things.

@83hsharma 9 лет назад

loved it.. Thanks for explaining in a simple way!!!

@FlorianSchindler-r4c Год назад

Something about the sniff at 7:15 makes me feel like I'm live at a Hedge Fund board meeting.

@Bas1lio 5 лет назад

Thank you man, for the text. FYI: B+ of Moody’s is B1 :)

@mff812 5 лет назад

Hard topic explained in very simple and understandable language.

@rememberme12356 8 лет назад

oh fuck now i understand what's happened in 2008

@Wilburgur 8 лет назад

+Think Yourself Yep. But mortgages instead!

@Stynieke91 8 лет назад

+Think Yourself And that's only very little of what happened in the rest of the world! But yeah, that was one of the biggest things that caused it all

@marekklucka4407 7 лет назад

Yup, but mostly because of CDO's

@crimsonstrykr 4 года назад

The timing of publishing this video is just amazing! 2008!

@sayyedsalman 16 лет назад

Thanks Sal for Explaining the Credit Default Swap.

@LECityLECLEC 3 года назад

I love you Sal thanks for this series! Making the complex simple.

@sunfun7997 9 лет назад

Great explanation, fast forward to November 2015, are the insurers of the CDS NOW required to have the money set aside ?

@OttoFazzl 7 лет назад

LOL, this is a funny question. Of course not, why would they?

@oakleysierney1918 7 лет назад

Otto, Are you a moron for asking that? This whole video just showed why they should be required to do that.

@OttoFazzl 7 лет назад

I am not sure you know how lobbying works in the U.S. and how large banks are able to avoid any kind of responsibility for screwing up the whole economy. And you also seem to confuse that what banks "should" do is not the same as what they do in practice. In addition, you are a rude person and you do not deserve an answer, so this comment is not meant for you.

@oakleysierney1918 7 лет назад

No from what you first wrote, it's you that doesn't know that what they 'should do' isn't 'what they do'. That was the whole point of Sun Fun's question. Because they DON"T have the money to pay their obligations they should be REQUIRED to. When Sun Fun asked if they are now required to you laughed and chided him, which was by the way, extremely rude. You are both ignorant and obnoxious.

@dannyproducts1817 7 лет назад

somebody doesn't get sarcasm

@nathantaylor3773 4 года назад

Very well explained, enjoyed this!

@Smokr 15 лет назад

Thanks. A nice, understandable rundown on these insane transactions and how one domino falling brings down so many others.

@km7yh 6 лет назад

Can someone suggest a video to explain how the outside betting on certain payments works? Like how would the hedge fund in this example have been aware of the credit default swaps from the lenders in the first place? How are they able to rope in an insurer to bet against someone else's debt?

@bmorgens 11 лет назад

Question: Do you guys(fellow commenters and business men) find CDS's to be on the more advanced side of finance? Or beginner stuff?

@jasminecracknell5612 4 года назад

This is incredibly helpful, thank you!

@abdulfattahahmad 13 лет назад

OMG, you have explained everything that I've been trying to do so in years. Thank you so much.

@atultiwari1000 15 лет назад

Khan Academy , you guys are wonderful I am already a donor to your academy , just want to support your endeavours where i am learnign and you spread knowledge also all the best Atul

@EddyHudson-y3y 18 дней назад

thanks, I'm well on my way to becoming a Synthetic CDO manager after this one

@drewkono2013 12 лет назад

KhanAcademy has made my understanding of CDS soo much better! I thank you for these 2 videos. Keep on making more! What other factors played into the huge bust? besides the housing market bubble where people failed to pay mortgages?

@cesarsosa5688 6 лет назад

Great video. My only criticism of it is the assumption you make that the government will do a better job at evaluating those companies when the government is the institution that bailed them out. In a free market, those companies would all be out of business, so other companies wouldn't make the same mistakes in the future. Although, that would also mean a lot of people would have lost a lot of money in the process.

@pj8324 4 года назад

So why would a company need to borrow a certain amount of money from some sort of fund in the first place? They just need capital and it sort of works as a loan?

@soho1080 3 года назад

The king of vague explanations!

@Yasnasahar Год назад

Asalaam brother Ramadankareem Mubarak amazing video 👌

@MG-yp7tb 8 лет назад

Great job sir! You do what you do, very well.

@insanecow31989 12 лет назад

With the financial crisis in hindsight, its easy to criticize the CDS model. To me it seems like this model of 'pooled risk' is very similar to any other insurance company, or similar to a bank which loans out its money. Corporations such as AIG that distribute risk, as far I can tell, seem to serve the useful purpose of increasing market liquidity, giving corporations access to the capital they may need to grow. From Sal's explanation, the problem that I see with a corporation like AIG . . .

@carltayag22 7 лет назад

This is wonderful. Thank you for the great work.

@kylegorczynski 4 года назад

I am having trouble understanding how Hedge Fund 1 can get insurance for Company B without lending them money. What "insurance" are they buying?

@sparshjain4736 4 года назад

Its not an insurance.. Its a legal 'bet'

@babybeel8787 3 года назад

@@sparshjain4736 so basically the hedge fund doesn't borrow any money but bets on whether company B will go bankrupt? How is that legal xD

@sparshjain4736 3 года назад

@@babybeel8787 yes it is.. Just like people bet on football teams 😂

@passwordrequired 13 лет назад

thanks, this helped my understanding greatly

@nafis_zaki 3 года назад

Khan academy is the real deal!

@ferdousfami5401 Год назад

Sat to watch the movie 'The Big Short'. Understood nothing. Watched this video. Now I'm going back feeling like I have a degree on this 😂. Thanks man, learned a lot❤

@mrsc3120 2 года назад

You lost me at H1 but I'm determined to stick with it. Your videos are excellent.

@bartholomew1211 2 года назад

What’s the incentive for a pension fund to loan money if they are only breaking even. Where does the pension fund profit

@sushantjadhav1755 Год назад

Just a doubt when the Hedge fund took a insurance on $10Billion didn't they buy debt or give that ammt to I2.? And why did they only pay 15 million or are we considering the principal value of 10 Billion+15million$

@machugo3368 7 лет назад

THE BEST FINANCIAL LECTURE EVER!!!

@ShovelShovel 8 лет назад

so what is a "credit default swap" is that the insurance on the debt or is a credit default swap the whole principle of it or both?

@doc7474 14 лет назад

Wonderful explanation. Thank you.

@premraj.m 7 лет назад

thank you very much Khan, nice session I had

@itscamtheman 3 года назад

8:03 if "b" collapses tomorrow.... and on september 29, literally the day after this video the dow fell 777 points

@alena725 5 лет назад

Thank you for teaching us! well worth the time

@sprisyatasedai640 2 года назад

i didnt understand the part where it mentioned that the pension fund has to unwind the debt. but how do they do so?

@oakleysierney1918 7 лет назад

I think you made a mistake at 10:40. You said P2 was holding some of A's debt which they will have to unload because A was insured by I1. But I1's rating wasn't downgraded , it was I2 that was downgraded. So I think you meant to say P2 had to unload A's debt because it was insured by I2. That would make sense.

@abhinavitsmebellamy 5 лет назад

This is great stuff. Thanks a ton!!

@chf8096 3 года назад

Was there any change in the law to mandate companies to put aside money for insuring debts after 2008?

@spacekillers123 13 лет назад

Thank you Sal, you are awesome! One day when I graduate college and get a job, I'm going to donate to you big time. No money right now lol You are helping me so much :DD

@tanvigandhi8879 4 года назад

I have a doubt! When B goes under, will the pension fund be compensated by the insurance company? Because B is essentially loosing the pension fund's money. Though the insurance company pays the counter betting people, isn't it mandatory for it to pay the pension fund as well?

@fabs7795 4 года назад

the insurance company will find itself in the akward position to pay both the pension fund and the hf. it's the insurance job to calculate the risk with it's analyst and make sure that overall if one call goes south there are other 10 or 100's that are paying off.

@yragoam6886 6 лет назад

Would you say this explains the synthetic CDO as explained in the Big Short?

@SanketDube 7 лет назад

Wow you explain so well.

@nanadapaah2930 4 месяца назад

Great video

@mallikaarahane5904 4 года назад

Superbbbbb explanation

@pepiluci75 10 лет назад

Best explanation ever.

@chastonmatta 5 лет назад

Great video! Thanks!

@AlexQuarteyPapafio 8 лет назад

Very good lecture. Very clear.

@icanpossible9336 7 лет назад

Alex Quartey-Papafio who are you. i have seen your round face before Alie.

@Xelferd 4 года назад

Thank you!

@davidgomez8566 11 лет назад

You are right, there's no need for a connection to Company B. Regarding your second question, the hedge fund is not insuring itself against anything, they are just betting that Company B will default and they will get 10 B just by paying 200 bp/year.

@chandanpujapanda 14 лет назад

great work explaining and sharing your knowledge

@Iemand213 5 лет назад

Are hedhefunds (or any other entity) really allowed to make an insurance on a product that does not exist or is not theirs?

@silverheart573 8 месяцев назад

Have to give credit to these explain videos, simply get straight to the juice without the need to spend lot of time and effort .

@johnehmer3608 5 лет назад

would you not take your premium and reinvest it to protect your self?

@timonlokz 5 лет назад

big egos and greed get in the way

@gekorio 11 лет назад

How do insurance companies decide if to insure a company's loan or default? Do they make an audit or just by looking at market data, such as stock market, etc?

@galanoth17 12 лет назад

so how does P2 and P1 unload A's or B's debt that they can no longer hold? Do they just ask A back for the loan? or do they ask the insurer for the loan?

@sgt7 6 лет назад

Great video. However, it should be emphasised that an insurer should not need to have enough capital to finance ALL the dept it insures. It should need to have enough to insure the amount that is likely to default. This is normal practice as far as I know. The problem here is that these insurers did not even do this.

@sparshruhela8584 3 года назад

Why I 2 (insurance com.) didn't check whether H1 really lends $10 billion to B ?

@yh-ir3op Месяц назад

Is this still relevant in 2024, or have the regulations changed?

@thegoonist 14 лет назад

one more question: how does one get out of a loan obligation as mentioned in 10:32? is it possible in the loan contract to include a clause that states that the lender can request his money from the borrower at any point in time? and if the borrower is unable to repay the money the lender is able to sue? im not sure about this because i mean most loans are for investments and these take time to bear fruit right? (in most cases at least) and wouldnt it be unreasonable to include this clause?

@automatedcryptoapp4573 2 года назад

Excellent

@RNelson144 14 лет назад

It's strange that you can buy insurance on debt that isn't owed to you, but in the video you state that you can buy insurance on debt that isn't owed to anyone ($10 billion when the company doesn't have $10 billion in debt). How do you identify the debt being insured except by reference to the amount and the person it is owed to?You owe $1 to each to two people for a total of $2.A third party insures $100 billion worth of your debt.Is payment conditional on the default of either debt? On both?

@simonemadaschi1691 Год назад

What i don’t get is what happens if company B doesn’t default? Does H1 keep paying 200m every year without getting a single cent?

@musak.4068 Год назад

Company B pays until they go bankrupt OR end the transaction. They can end the bet at any time they wish, and would have only loss the money they paid out.

@kaivalyapatankar5840 10 лет назад

Does this all just mean as long as Ppl r ready to buy ppl wil sell just abt anythg even things that dont exist?

@ashwinbhat95 4 года назад

Kaivalya Tetali that's literally how most of the economy in the modern world works. Most of the these company valuations are based on the hope that they pay off in the future.

@emilianopickett 16 лет назад

We need to talk. How likely is this? If the US defalults what is the next step? When are the 2009 mortgages due, in what month? Jeff

@sully24najm 9 лет назад

You're videos are great, props.

@javierfuertes487 4 года назад

I have a question. Can insurer 2 insure insurer 1's insurance (I know it's kind of tongue twisting), I mean, can an insurance company get a CDS from another insurer? Amazing videos by the way!

@timothyharshaw2347 2 года назад

Yes. In regulated Insurance (P&C, Life, etc) the concept is called Reinsurance. In unregulated CDS's, you can purchase CDS's against your CDS's

@zulfi721 14 лет назад

nice explanation

@gathapawar974 4 года назад

Please help me with credit default index topic

@imbagogo 14 лет назад

@lilpenguinboy The point Sal is trying to illustrate is that these insurance companies and other entities who hand out swaps don't need to set aside money for the risk of default.[cos of loosely defined mandate (pre-crises)] Thus making them in Buffet's words "financial weapons of mass destruction".