German’s Unexpectedly Ban Of Naked Short-Selling And Default Swap Speculation Created More Uncertainties
German financial regulator BaFin announced late yesterday that the country would prohibit naked short-selling and speculation against European government bonds using credit-default swaps due to exceptional volatility in the Euroland’s bonds. Short selling involves the sale of borrowed securities in the hope of profiting by buying them later at a lower price and returning them to the owner. When securities are sold naked, the trader fails to borrow the assets before sending an order to sell. Credit-default swaps are derivatives that pay the buyer face value if a borrower — a country or a company — fails to meet its debt obligations.
The World Economy... - 19/5/2010
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