Why would someone sell credit default swaps for companies with high chance of defaulting?

Question

Similarly, why would anyone buy credit default swaps for companies with low chance of defaulting?

Answer 1

Because the price is right. If you think a company has an 80% chance of defaulting but you can sell a credit default swap for 85 cents on the dollar, then you’ll do it. Similarly, if you think a company has a 2% chance of defaulting but you can buy a credit default swap for 1 cent on the dollar, then you’ll do it. The markets set the price at a level where there are both buyers and sellers.