Trying to learn more about Credit Default Swaps (CDS).
Example I saw on Wikipedia had an institutional investor buying a high-yield bond, then entering into a CDS to protect himself in case the bond issuer defaults. Of course, the CDS has a cost, which reduces the yield of the bond.
My question is: what is the benefit of this to the investor? Why not just buy a lower-yielding bond from a more credit-worthy issuer?
What am I missing?
2006-08-30
17:01:06
·
2 answers
·
asked by
AZNYC
4
in
Investing