The Benefits and Cost of Finance Assignment | Get Paper Help

This is a group project, I only have to do the third point: ” Discuss the benefits and costs ”

The group project consists of a written report. Prepare a double spaced 8 -10-page paper addressing the topic.

This is the proposal that we are working on.

GROUP PROJECT PROPOSAL
Topic: Future Structure of Credit Default Swaps
We chose this topic because credit default has grown to be an important global market affecting the financial community. So, it was very important to all of us that we would suggest a direction for future research in order to further deter this growing financial epidemic.

Proposal
Consider whether the claim that resulted in a credit default swap originated through an exchange that was traded or through a clearinghouse.
Determining the origins would eliminate much of the imposed risks to the financial system and would prevent further issues in the financial market.

Main Points
A brief overview of the size, structure, and scope of the market
Review the principles that govern the use of CDS
Discuss the benefits and costs
Provide an overview of the post-crisis
Explain how the proposal will help

The project topic chosen is the future structure of credit default swaps. A credit default swap refers to a financial agreement whereby the seller of CDS becomes compensated by the buyer for default of debt. That would imply that the CDS seller will have to ensure the buyer against any form of defaulting on the asset.
Credit risks are associated with the credit crisis because of the speculative value that they possess. Some investors make use of the swaps when they tend to believe that the risks that are associated with them may be too high or too low. In a case whereby speculations are done, it is hard to determine if the gain will work towards the buyer or the seller. In that case, if the financial leverage works against all the odds, then there would be a credit crisis that would lead to losses for all involved.