Although a credit default swap (CDS) is similar to an insurance policy, it differs significantly in that it is not required that the buyer of the CDS is the asset owner. That is, insurance is set on something that is owned by the insured, but a CDS is an asset that is not owned by contracting the CDS. This type of CDS is called naked, and is actually equivalent to a bet.
Features
Credit default swaps are traded Over The Counter (OTC), that is they are not traded on an organized market. They are tailor-made contracts between the two contracting parties. The underlying assets on which these swaps are issued include any loan or debt security such as a bond both private and public. Reference entity is the organization or company issuing the underlying securities as shown by the Market Scanner.
There is no regulation on these operations in most countries. Although credit default swaps have some elements in common with insurance operations, they are not covered in insurance activities. Thus, the selling banks do not have to meet any of the standards of solvency reserves or regulating the exercise of the insurance business.
They are called uncovered credit default swaps (or naked CDS) in cases where someone signs a contract default swaps without any asset holder who wants to insure. In these cases, the purpose of the operation is speculation on the evolution of the underlying assets and may even lead to a paradoxical case that emit more credit default swaps.
Securities trading – How candlestick chart is used in technical analysis
In Economics, the candlestick chart is a widely used type of technical analysis that reflects the opening and closing price of a security. This is in addition to the maximum and the minimum value displayed by the Market Scanner.
The operation is basic, each candle can be red (black) (the price of a stock, future, index or currency) or green (white) (the price has gone over the top of that same candle). A rectangle (body of the candle real body) indicates the change from open to close. A line that crosses (shaded) indicates the maximum and minimum.
Operation
Generally, the candlestick chart method informs us the above parameters on a trading session (each candle represents a trading day) but you can use candles based on 30 minutes, 10 minutes, weekly and monthly intervals.
There are candles that, by themselves, are leading indicators of behavior of transactions, but the most common is to use figures of three candles. That is, three candles whose characteristics indicate the value shown on the Market Scanner.