Investors turn to credit derivatives amid fears of liquidity freeze in next market crisis
This article by Sunny Ho describes a new trend among money managers’ strategies to ensure liquidity. By purchasing and backing their trades with CDS the money managers ensure that there would be sufficient liquidity if the trade in question spoils.
Using CDS in that manner is not without its own controversy. The CDS rely on the liquidity of the insurer and in a financial crisis that may be an issue for the regulators, where the CDS special provisions may kick-in. For that reason, we could suggest Deriveum – with its algorithmic Price Stability Mechanism the token has constant liquidity ensured; further, the Heger allows for a price fix and negates token volatility risks.
