Credit Default Swaps are Fun for Everyone

The worst part about credit default swaps is their inaccessibility to unsophisticated investors. At least, I think that’s what ProShares had in mind when they launched their credit default swap ETFs yesterday.

TYTE buys swaps on the CDX index. WYDE sells CDX swaps. I’m not making this up.

CDX is an index that tracks North American credit default swaps. Traders who buy or sell TYTE and WYDE don’t actually own or act as counterparty to credit default swaps, of course. CDX is based on a synthetic bond with fixed coupon payments. It is made up of 100 CDS issuers, and if there’s a credit event, the sellers pay off the buyers, and the index is restructured with new CDS and a new base price.

Who needs hedge funds when individual investors can make Big Shorts from the comfort of our 401k accounts?

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Finally, Credit Default Swap ETFs –

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