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I was wondering if anyone is familiar with how credit default swaps can be used for corp funding and financing.

I came across an old case where a bank created a funding structure for a client (asset manager). However, I'm not familiar with how this takes place.

Any insight on the above would be greatly appreciated.

Thank you, Faisal

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I'm not sure if I understood your question right.

What is a CDS?

"agreement that the seller of the CDS will compensate the buyer [...] in the event of a loan default [...]. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller [...]"

https://en.wikipedia.org/wiki/Credit_default_swap

How this could be used?

The Investmentbank could have helped the Asset Manager to sell the protection against the default of a bond or a basket of bonds, as an income generating strategy.

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  • $\begingroup$ That makes a lot of sense. Basically like selling options to generate income to finance other investments. $\endgroup$ – MarkKnight Jun 28 '17 at 18:20

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