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What is the risk for a credit default swap investor?


An investor enters a CDS contract with a market maker who provides continuing cash flow when the underlying risky asset defaults but what is the risk that the investor still holds even when he's in the contract?

The risk for the investor is that the risky company's credit profile improves dramatically or that it is acquired by a stronger company.
Without the credit swap the investor could have sold the bond cashing in on it's increased price. This is an opportunity cost.

The second risk is that the market maker himself defaults.

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