[politicket]

From 'wideawake' - posted up the thread. And I quote:

"Of the above named companies, do you know how many CDS contracts have actually settled, and for what amount they settled? The answer may surprise you."

Ok, wideawake, surprise me....I'm waiting.

[wideawake]

The surprise is that the bonds are still quoted and traded. In a vacuum, one would suppose that every CDS contract was closed out and every available bond traded in for par.

As you deduced from my explanatory post, there was indeed a short squeeze and it continues.

However, rather than sell assets to buy the underlying of the contract, a lot of managers have decided to simply take the loss on some positions and only settle others.

In much the same way, a equity derivatives manager might decide to allow an option to expire unexercised rather than sell assets that are more valuable than the exercised option which would have a lower rate of total return than the assets he would have to sell.

In this way, risk is spread much more diffusely.