AI debt worries drive a surge in credit default swap trading
Photo: Crypto Briefing
Investors are paying more to insure against defaults at Oracle, CoreWeave and Big Tech as AI borrowing balloons Wall Street has found a new way to express doubts about the AI boom. Rather than shorting the stocks, traders are buying insurance on the debt. A credit default swap works a lot like a homeowner’s insurance policy, only for bonds. The buyer pays a regular premium. If the borrower defaults, the seller covers the loss. That premium is quoted as a spread in basis points, where 100 basis points equals one percentage point a year.
Source: Crypto Briefing
