Derivative's documentation matters

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Firms Involved

  • Codere SA
  • GSO Capital Partners (Blackstone Group)

Year of the event


Description of the case

Codere SA is a Spanish gaming company. Blackstone's GSO, lead by Akshay Shah[1] fund bought CDS on the firm, and then went on to propose cheap financing to Codere, with the condition that they delay the payment of a coupon on existing bonds by a few days, hence briefly defaulting and triggering the CDS which GSO owned[2]. This trade was widely criticized as the writers of the CDS found the default to be manufactured and artificial, and that CDS were not meant to be used like this and shouldn't have been triggered. The trade was nonetheless legal and went through, making a handsome payout to GSO.


  • Derivative instruments don't behave as we want them to. They behave as described in their documentation: prospectuses and ISDA rules. A deep understanding of these details can provide an edge and yield profit.
  • CDS are primarily hedging instruments: using them for other purposes, for example "naked" speculation, requires extra dilligence to ensure that one only gains exposure to the factors or risks desired.


  1. "The mystery trader who roiled Wall Street", Financial Times, 2018-06-05
  2. "Blackstone made money on CDS with this one weird trick", Matt Levine, Bloomberg, 2013-12-05