Credit default swaps 2 | Finance & Capital Markets | Khan Academy
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- Опубліковано 27 вер 2008
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Systemic risks of credit default swaps. Financial weapons of mass destruction. Created by Sal Khan.
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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
Agreed!
Who's this instructor??? someone knows his name? like how can we address him suggestions/questions??
@@amald9702 Sal Khan... as in Khan Academy
@@meinbherpieg4723 and now Khan Academy is one of the most famous online learning platform in the world
*TERESA JENSEN WHITE*
crazy when you realize this video was made in 2008..
why ?
@@jomango1929 2008 financial crisis
Even creepier when you realize that the series started with mortgage backed securities in late 2007.
@@katherinejohns9974 XCCVXCCXXXVXXXXXXCXZXXXXXVXXZXXXXXX
The 7 dislikes were hedge fund managers...
Hahahahah i cry 😂
Hhaahahahha I‘m dying 😂
Nope he mixed up I2 and P2 ... P2 was insured by I1 not I2
Haha I cried laughing 😂
🤣
This should be taught in school.
Mister Chartreuse it really should
That's what Kyiosaki os trying to say.
It is
it is but I didn't understand so i watched this and now I do lol
Well here it is
I am watching this video to get a better grasp of the movie The Big Short 😅
Me too. I guess Murray would be H1 and I2 would be Goldman Sachs.
Same here bro
Wow 😃 same here dude
lol me too
🙋🏾♂️🙋🏾♂️🙋🏾♂️
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.
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 UA-cam 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
Me2
Man if you can’t understand a movie like big short, this stuff ain’t for you...
@@arnav4174 now I understood hehe
Who’s here after “The big Short”?
Here dude!
lol me
Me 😂
This finance products will be better called "Rating default swaps"
oh fuck now i understand what's happened in 2008
+Think Yourself Yep. But mortgages instead!
+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
Yup, but mostly because of CDO's
That's even better than what I learned from Master Degree. You are awesome, mate :)
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
By far, this is the best explanation of CDS I have seen, and it has clarified a great deal for me. Thank you.
just saw the big short movie now I know from where did they wrote their script with perfect numbers
Micheal Lewis wrote a book and then a movie was shot
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
3:57, that's what changed the world. Great video, sal.
OMG, you have explained everything that I've been trying to do so in years. Thank you so much.
loved it.. Thanks for explaining in a simple way!!!
Thanks. A nice, understandable rundown on these insane transactions and how one domino falling brings down so many others.
Swaps 2? More like "Super information for you." Khan Academy being great as always. Thanks for sharing!
I've been trying to figure out caused the 2008 crash. This man explains it very well. He's excellent.
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?
I love you Sal thanks for this series! Making the complex simple.
Your explanations are amazing and work on people 100% ! Thank you
I haven't watched this finance series..But I gotta say, you are the man..You harbor so much knowledge...
thanks, this helped my understanding greatly
Thank you for explaining that so well. This video will become popular again in the coming year.
This is wonderful. Thank you for the great work.
This is incredibly helpful, thank you!
Why you removed finance and market from khan academy.?if possible restore these sections
Thanks Sal for Explaining the Credit Default Swap.
Amazing videos . That is so brilliant and you may replace many professors in my college !!!
Something about the sniff at 7:15 makes me feel like I'm live at a Hedge Fund board meeting.
Thank you for teaching us! well worth the time
very well explained. !!! and was quite a fun to learn the complex things so easily by the way he explains things.
Very well explained, enjoyed this!
Great job sir! You do what you do, very well.
This is great stuff. Thanks a ton!!
Best explanation ever.
Thank you man, for the text.
FYI: B+ of Moody’s is B1 :)
Thanks much for your explanations, makes it very easy to understand.
Wonderful explanation. Thank you.
Holy Moly.
Thanks for this, Sal.
Thank you so much for the great explanation
The king of vague explanations!
You're videos are great, props.
Really interesting and well explained. I guess you could say CDS are like a negative insurance. It works the exact reverse to the initial pension fund lending and then getting insurance
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
THE BEST FINANCIAL LECTURE EVER!!!
Excellent videos. Thanks!
great work explaining and sharing your knowledge
i understood and liked the video, but you do make leaps in your vocabulary that one has to overcome and infer upon oneself.
thanks a lot for your explanation !!
Great video! Thanks!
I am having trouble understanding how Hedge Fund 1 can get insurance for Company B without lending them money. What "insurance" are they buying?
Its not an insurance.. Its a legal 'bet'
@@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
@@babybeel8787 yes it is.. Just like people bet on football teams 😂
thank you very much Khan, nice session I had
Wow you explain so well.
The timing of publishing this video is just amazing! 2008!
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.
Again Khanacademy.. awesome videos :) you make something confusion to something totallly understandable :D
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?
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 . . .
perfect explanation
Thanks. Tht was gud.
well done!
Great insight about CDS....
Thank you!
THANK YOU!
Amazing. All of your vids are coming true in 24 to 48 months. If not soones.
Question: Do you guys(fellow commenters and business men) find CDS's to be on the more advanced side of finance? Or beginner stuff?
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
Great video
Thanx a lot
awwesome videoo thanks a lot
I like how he calls it "Standard is Poor" before he corrects himself lmao
Very good lecture. Very clear.
Alex Quartey-Papafio who are you. i have seen your round face before Alie.
Hard topic explained in very simple and understandable language.
Excellent reply! U just summarized the ENTIRE video. Hah. Kudos to you.
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?
thanks!
awesomeeee!
Khan academy is the real deal!
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.
Excellent
nice explanation
Superbbbbb explanation
Would you say this explains the synthetic CDO as explained in the Big Short?
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❤
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.
legend!
Great explanation, fast forward to November 2015, are the insurers of the CDS NOW required to have the money set aside ?
LOL, this is a funny question. Of course not, why would they?
Otto, Are you a moron for asking that? This whole video just showed why they should be required to do that.
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.
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.
somebody doesn't get sarcasm
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?
Asalaam brother Ramadankareem Mubarak amazing video 👌
@Hudson4351 That is correct. Insurance rates are based on actuarial tables that predict the probability of various events happening ie. car crash, age of death, etc. CDS are different though because it is as though 1000 people could get insurance for one car. Even if the probability of this car crashing and the insurance having to be paid out is the same as all other cars, in the event that this car actually does crash (the company defaults) then the insurance company is screwed.
You lost me at H1 but I'm determined to stick with it. Your videos are excellent.
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?
you are a legend
allowing you to "bet" money that someone else has to default on his debts, creates a very dubious (immoral? destructive?) incentive for you to do everything in your "power" to cause that default. A lot of powerful people (or funds) have quite enough leverage to accomplish this.
This doesn't sound healthy for an economy and society.
Have to give credit to these explain videos, simply get straight to the juice without the need to spend lot of time and effort .
@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".
Sal your a GOD.
Are hedhefunds (or any other entity) really allowed to make an insurance on a product that does not exist or is not theirs?