For those who don't know, ISDA are the group that determine whether or not your complex CDS (Credit Default Swap) will pay out or not. The theory goes that if the CDS underlying changes the terms of credit and because there are hundreds if not thousands of ways this could happen, you need a bunch of mavens (clever people) to tell you whether this consitutes a 'credit event'.
If you believe that the company/sovereign you have bought CDS against has committed a credit event and they disagree, you're not getting any cash......
You would think therefore, that ISDA are a group of mavens much like Standard and Poors in that they are independent and therefore don't lose or gain by the outcome of their decision.......Think again
Seems a little odd to me that the people who write these CDS are the same people that judge whether they are be fulfilled??
I don't know, maybe I am being a little harsh as theoretically a credit event has not yet occurred (no-one has yet been forced to accept a change in agreements they do not want) but one thnigs for sure, you are like to find less people that think CDS' are a great way to insure against default within your portfolio
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