Hedge funds are in line to benefit from a unanimous ruling by the Credit Derivatives Determinations Committee that UBS is the sole successor for credit default swaps contracts linked to Credit Suisse following the emergency ‘merger’ of the former rivals in March, according to a report by IFR.
Hedge funds are in line to benefit from a unanimous ruling by the Credit Derivatives Determinations Committee that UBS is the sole successor for credit default swaps (CDS) contracts linked to Credit Suisse following the emergency ‘merger’ of the former rivals in March, according to a report by IFR.
Although widely expected, the ruling, which the committee passed by 11 votes to zero, finally ends months of uncertainty over the future of Credit Suisse credit default swaps and provides profits for the hedge funds that wagered on the CDS spreads between the two banks converging following UBS’s rescue of Credit Suisse.
The gap in five-year CDS between the two banks widened to over 1,000bp on 15 March at the height of the Credit Suisse crisis but had narrowed to below 20bp last week in the wake of the completion of the merger in mid-June.
