One of the earliest signs of the financial crisis in summer 2007 was the plunge in the indicaaes compiled from credit default swaps (CDSs) on a basket of subprime backed bonds. Recently, the worsening situation in the emerging countries has been perceptible in the steep rise of CDS spreads on...

Credit Default Swaps, as the name indicates, are credit instruments used by banks, non-banking financial institutions, hedge funds and investors, so as to shift risk from one party to another (Mengle, 2007). These instruments are rife with controversy and opposing arguments with regard to...