Pre-2008 CDS:
– Favored for speculation, not just risk hedging.
– Little transparency, weak regulation.
– Amplified systemic risk, seen in Lehman Brothers’ crisis.
– Exposed significant counterparty risk.
Current SRTs:
– Lean towards risk management, avoiding speculation.
– More stringent regulation post-2008.
– Clearer structure, targeted at reducing banks’ credit risk.
– Transfers risk to diverse, risk-ready investors.
In essence, changes in usage (speculation to risk management), regulation (loose to tight), transparency, and risk management approach mark the shift from pre-2008 CDS to current SRTs.
💡 Let’s stop just collecting data. Let’s start making it work for us. Let’s transform banking, together. 💡
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