economy
Wall Street bets on credit defaults with investment index: Report
Wall Street is banking on mass credit default swaps by creating a new investment index that would help investors bet against managers of private credit funds, according to a report.
TL;DR
- A new investment index, CDX Financials, is being created to enable credit default swaps.
- The index will allow investors to hedge or short credit risk in the private credit industry, valued at over $3 trillion.
- Banks including Bank of America, Barclays, Deutsche Bank, and Goldman Sachs plan to distribute the product.
- S&P Global is collaborating with banks on the launch of CDX Financials.
- The index aims to help banks trade and protect themselves from potential losses on loans to private credit fund managers.
- Credit default swap index trading reached a record $38 trillion last year, despite concerns over their role in the 2008 financial crisis.