As we all know, CDS is a credit default swap, which is simply a financial derivative that controls credit risk. Prior to this, the collateral was usually secured by an insurance company for a fixed fee. However, as the collateral market became larger and larger, the demand for this insurance premium also increased, so in 1998, standardized CDS contracts appeared, completely fluidizing credit risk and turning it into a marketable product.

The subject of CDS contracts is credit risk, and from this point of view, it is no different from those commodity contracts and stock contracts.

However, Wall Street financiers have not stopped developing this derivative, because the variety and coverage area of CDS are increasing day by day, so they refer to the stock market, and the CDS market is concocted in the same way, and CDX is created.

The so-called CDX, the full name of which is a comprehensive index of North American investment rating companies CDS, was founded in March 2002, with a total of 125 investment grade rating companies. Index publishers have weighted the CDS prices of these companies together in a certain way to form IG1, the first CDX index.

In the eyes of Wall Street, there is nothing that cannot be traded, and the CDX index is no exception, and soon there are contracts for the CDX index.

Select 125 high-quality companies in the stock market, combine their market capitalization and stock price, compile an index A, and then issue futures for this index A, and settle them in cash, which is called stock index futures.

Now, Wall Street selects 125 high-quality companies in the CDS market, weights their CDS prices and liabilities to get the CDX index, and then uses this index to issue futures, which is CDXIG.

IG contracts are named according to the number of issuances. For example, the first issue issued in March 2002 was codenamed IG1. Slightly different from stock index futures, IG contracts are issued every six months, and the term of issuance is much longer than the former, generally based on the term, including one-year, two-year, three-year, five-year, ten-year, etc. The newly issued contract is called a "new bond" and is the most liquid contract in the CDS market.

Since the CDX index is an index of CDS. That naturally reflects the risk level of the market to a certain extent. For example, if the entire bond market is full of default risks, then the price of CDS will naturally remain high, and the combined CDX index will naturally rise with the tide. In the opposite case, the performance of the CDX index will not be as prominent.

Like stock index futures, although they are designed to hedge risk, they still inevitably become a speculative playground for some institutions, especially when the CDS market as a whole is still an over-the-counter market and is not regulated.

Straight to the point.

"There are also indexes for CDS?"

Zhong Shi's face suddenly showed a look of surprise, "God, you can actually create an index of derivatives." It was so unexpected to me. ”

Whether he really didn't know or was pretending, the expression on his face at this moment was sincere.

"This principle is no different from stock index futures."

Bruno. Ixhir shrugged his shoulders and said disapprehantly, "For CDX and the issuance of futures, it is IG contracts. According to your situation, Mr. Zhong, I recommend that you buy IG index contracts for risk aversion. ”

"Wait......"

Zhong Shi waved his hand, put on an open face and asked, "What is the IG contract?" Please explain it to me in detail. I'm sorry. Your derivatives are so complicated that I'm getting a little out of your pace. ”

Attitude towards Bell Stone. Bruno. Ixir was clearly very satisfied, and it greatly satisfied his vanity to have such a leading man in the industry ask him for advice. Immediately, without thinking, he said bluntly:

"If CDS is compared to every stock, then the IG contract is stock index futures. Based on your exposure of $15 billion, if you want to buy CDS at market prices. Let's say the price is around $500 million. But instead of buying CDS of these bonds right now and putting that money into IG contracts, I expect it to cost only about $100 million to $150 million. ”

"Although the leverage is a little higher, it may save you a lot of money on risk aversion. Although the maturity of this contract is generally longer, it is better than stock index futures. You can choose CDS when you finally deliver, which is equivalent to commodity futures, so that you can avoid risks and increase the leverage of capital utilization at the same time, killing two birds with one stone! ”

"Wait, you let me think about it again......"

Despite the fact that Bruno. Ixir pouted hard, but Zhongshi remained unmoved, interrupted the other party's conversation, frowned and thought about it for a long time, and finally said, "I'm sorry, at least for the time being, I shouldn't buy that so-called IG contract." ”

"Why is that?"

Bruno. Ixir's face twitched slightly, unable to hide his disappointment, but he quickly adjusted his mentality and continued to bewitch himself, "If there is anything else that needs to be understood, I will prepare materials for you right away, and make sure you understand every detail." ”

"You can give me a copy of the information, but forget it this time!"

Zhong Shi is still very resolute, "I will not rush into this market until I understand it thoroughly, this is my investment style." But if we have the next chance to work together, I might have to use you to buy IG contracts. ”

"That's great!"

After hearing this explanation, Bruno. Ixhir didn't want to say anything, but soon he began to slap Zhong Shi's ass, "Mr. Zhong's attitude towards investment is similar to that of Buffy, the stock god." Oh no, it's far more than Warren Buffett. There is no way for someone like Warren Buffett to compare with you, Mr. Zhong. ”

As we all know, Warren Buffett famously said that he would not invest in a field or company that he was not familiar with.

Despite the fact that Bruno. Ixir wanted to praise Bellstone, but at the last moment he chose not to belittle Buffett, naturally in order to avoid arousing Bellstone's disgust. You must know that Warren Buffett is a prominent investor in the world. If you belittle the other party like this, it may cause Zhong Shi's displeasure, and on the other hand, it will also seem that you are too low-level.

Jean Bruno. Ixir was slightly relieved that Bell Stone did not show too much joy or displeasure at his flattering words.

"Alright, that's the end of our conversation!"

Zhong Shi rolled his wrist and looked at his watch. Stopped talking, "As for the specific matters, someone from the Tianyu Foundation will contact you. Thank you for your hospitality, I'm going to go to my companion now, goodbye. ”

"Thank you again!"

Bruno. Ixhir stood up and respectfully escorted Zhongshi out of the conference room, and only after the other party's figure completely disappeared did he return to the room where he had just been.

"How's the talk?"

Jamie, who just disappeared without a trace. Thompson, I don't know when he appeared in this conference room again. I saw him look solemnly at Bruno. Ixhir asked. "Is he planning to buy CDS?"

"Of course!"

Bruno. Ikhir shook his fists excitedly and said excitedly, "I'll just say my strategy works. If you follow your reference directly, I can guarantee that he will at least shop around. After all, his CDS deal is quite large, and there is no guarantee that our competitors will give him a small discount. ”

"Hmph, although your strategy is good, have you ever thought that you could expose the danger of your position?"

Jamie. Thompson didn't have the slightest hint of excitement. Just said coldly, "Now the position on CDS has exceeded $100 billion." The arbitrage space in the meantime has not been wiped out at all, and if the other party detects it, we will not be able to eat and walk around. ”

"Don't worry, it won't!"

Bruno. It seemed that Ixir had completely changed to a different person, and the respectful look he had just now had disappeared without a trace, replaced by a look of disdain. "He also said that this guy is the king of money, but in my opinion, he is just a guy with no name. I don't even know what CDX is, I really don't know how this guy managed to accumulate such a big reputation. ”

His words were filled with disdain and contempt for Jongshi.

"Don't underestimate this guy!"

Seeing that the other party didn't take what he said to heart at all, Jamie. Thompson couldn't help but sigh in his heart. Knowing that he has nothing to do with the other party, the other party will naturally not take his words to heart, but out of duty, he still has to persuade again, "If the other party perceives that we are playing tricks in the CDX market and wants to oppose us, then we are really in danger." I advise you to be a little more restrained and reduce your existing positions. ”

"Am I afraid of him?"

Jean Jamie. To Thompson's surprise, Bruno. Instead of listening to his own words, Ixir stiffened his neck and replied forcefully, "I'm afraid he won't come!" I'd like to see how much money he has to fight me! ”

Not waiting for Jamie. What did Thompson say, Bruno. Ixhir continued, "Hehe, in this market, I am the king. Who you want to live and who you want to die is just a matter of words. To be honest, I'm still hoping that he can find this loophole, so that I can fight with him and see how good this so-called 'king of money' is! ”

"Hi ......"

said dry saliva, only in exchange for the other party's words, Jamie. Thompson was so frustrated that he left without looking back.

"Coward! Soft eggs! ”

Looking at the other party's departing figure, Bruno. Ixir secretly spat on it, and even this colleague did not escape his contempt.

……

"Beautiful young lady, may I ask you to do a dance?"

When Zhong Shi reappeared at the reception, he found Ivana in a daze in a corner, and immediately he played with his heart and walked up to the other party to play the trick of invitation.

Although Ivana is good at communicating, in this case, women are just an embellishment, so after a few words with a few noble ladies, she loses interest in socializing and finds a corner to quietly "daze".

Suddenly seeing Zhong Shi appear in front of her, Ivana was taken aback, hurriedly stood up, wiped her ear, and then asked, "The conversation is over?" ”

"What's wrong with you?"

Zhong Shi gave her a strange look, then said, "The conversation is over. Now let's do a dance, it's not in vain. ”

"Do you still want to feast?"

Ivana glanced at Zhong Shi and stretched out her slender jade hand to the other party, "Tell me, what did you talk about with those old foxes?" ”

"What did you talk about?"

Since the other party accepted his request to dance, Zhong Shi's hand naturally unceremoniously put on the other party's waist, gently hugged the other party into the dance floor, and began to spin gently under the accompaniment of music, "It's just that I talked about some business things, and you won't understand it." But I verified one thing, and this is the biggest gain of my trip. ”

"Opportunity to short JP Morgan?"

Ivana, seemingly nonchalantly, asked, "Did you get the news we wanted?" Are you sure? ”

"Of course!"

Zhong Shi's brow twitched triumphantly, and he said to the other party with a fluttering eyebrow, "Now, you can short JP Morgan's stock, I promise you'll make a lot of money." (To be continued.) )

PS: Thank you book friend seanju1 for voting for the monthly pass! Thank you, I am such a fat man and a hard worker! Thank you for your support, the author should work harder to write the book, I hope this month this book will have better results, although it is not easy, but I will do my best to persevere, but also hope that more book friends will actively vote for this book ~ grateful ~