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Credit derivatives contracts on struggling car rental company
Europcar proved worthless when they failed to provide any payout to protection holders on Wednesday, raising once again questions about the efficiency of credit-default swaps as well as corporate bond markets more broadly.
The lack of payout on Europcar CDS is highly unusual even in this often bewildering corner of financial markets, not least because the company’s bonds had been trading at knock-down prices just hours before. It meant that bondholders had missed out on a golden opportunity to effectively make free money by selling Europcar debt at well-above market prices in the auction used to determine CDS payouts.

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