Credit Default Swap Agreement

In Berkshire Hathaway`s annual report to shareholders in 2002, he stated: „While derivative contracts are not guaranteed or guaranteed, their final value also depends on the creditworthiness of the counterparties. In the meantime, however, before a contract is settled, counterparties record profits and losses – often roughly – in their current profit and loss accounts, without a penny changing ownership. The range of derivative contracts is limited only by the imagination of man (or sometimes, it seems, by mad people). [99] For example, imagine that in 2005, a hypothetical investment fund bought some corporate bonds from Washington Mutual and decided to guarantee their commitment by buying CDS from Lehman Brothers. .