[Verse 1] When banks get nervous 'bout their loans They need insurance for what they own A credit default swap appears To wash away their credit fears The protection buyer pays a fee To transfer risk across the sea Of corporate bonds that might default And turn their profits into salt [Chorus] CDS - Credit Default Swaps today Transfer risk and make it go away Buyer pays the premium each quarter Seller takes the heat when companies falter Reference entity in the middle If they fail, it solves the riddle Who pays whom when credits crack CDS has got your back [Verse 2] Protection seller takes the bet Collects premiums without regret Until the reference entity stumbles Then their comfortable world crumbles Physical delivery's one way Hand over bonds at face value pay Or cash settlement works just fine Pay the difference, draw the line [Chorus] CDS - Credit Default Swaps today Transfer risk and make it go away Buyer pays the premium each quarter Seller takes the heat when companies falter Reference entity in the middle If they fail, it solves the riddle Who pays whom when credits crack CDS has got your back [Bridge] ISDA master sets the rules Defines the terms and all the tools Credit events trigger the clause Bankruptcy, restructuring, default's cause Notional amount sets the size But leverage multiplies the prize Speculation or hedging pure Both motives keep the market sure [Verse 3] Investment banks love to trade These swaps where fortunes can be made Hedge funds betting companies fall While pension funds protect it all The premium spread reflects the risk Of corporate bonds turning risky When spreads widen, danger grows When they tighten, confidence shows [Final Chorus] CDS - Credit Default Swaps today Transfer risk and make it go away Buyer pays the premium each quarter Seller takes the heat when companies falter Reference entity in the middle If they fail, it solves the riddle Who pays whom when credits crack CDS has got your back [Outro] Credit protection bought and sold Derivatives brave and bold In the market's endless dance Credit swaps enhance your stance
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