Via Alea, a Reuters story about a new Citigroup product where you can apparently buy default protection at zero initial cost, paying only if and when the defaults start happening. There’s just enough information in the article for it to be intriguing, but not quite enough for it to make sense.
I understand that if the defaults happen, then the cost of protection is higher than it would have been if you’d bought it up-front. But at that point you don’t care – you’ll happily pay a lot of money to protect yourself against a certain default. Can someone explain to me how this product works? Can you really buy protection and yet pay absolutely nothing if nobody defaults?