And this is where credit default swaps come in.

So these are the people who write the credit default swaps, and then there are the people who would actually buy the credit default swaps.

There are some companies that just specialize in writing collateralized sorry, in writing credit default swaps.

And let's say we have a bunch of people who write the credit default swaps, and I'll call them insurers.

Prime Minister Olmert accepts nearly all Palestinian demands... including handing over almost 100 of the West Bank... with minor land swaps.

We would look the other way when Bear Stearns is creating collateralized debt obligations, or AlG is writing credit default swaps.

Quiz What does s, t t, s do? So, the answer is, it actually swaps the value of s and t.

So they were essentially hedging the default risk by buying these credit default swaps, which was essentially just an insurance policy from this Insurer 1.

What's interesting about Credit Default Swaps sometimes referred to as CDSes is that even though there are insurance for all purposes, they are not regulated like insurance.

Using what I described in the previous slide what we're just talking about, you can actually patch this up by moving the 50 around doing some various swaps.

I came to understand it's a lot more than the credit default swaps we read about, a lot more than just a hyper inflated real estate market and so on.

So the company insured itself against loss by betting that what they're selling would fail using, what's called, credit default swaps through giant insurance agency AlG, the world's biggest insurance agency.

For the work that it's doing is it's going to do a series of swaps possibly making it all the way to the bottom of the tree but never further than that.

Finally, some of you may know about Bubble Sort , which is where you identify adjacent pairs of elements which are out of order, ... and then you do repeated swaps until in the end the array is completely sorted.

So, essentially, we need to do some sort of an analog of down heapify that I call up heapify that takes this value that might be problematic, swaps it up if it is, and then continues to swap it up the tree until it reaches a place where it is smaller than both of its children.