Overexposure to credit default swaps contributed to financial meltdown

Overexposure to credit default swaps (CDS) -- a market-traded form of investment insurance -- are believed to have contributed to last year's financial meltdown. Trying to understand how CDS prices are determined, a team of researchers concludes that earnings have a major impact and in turn, CDS prices can seriously affect the economy. When earnings drop, CDS spreads rise.

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