The use of credit-default swaps, or private, insurance-like contracts, exploded in recent years into a murky, $60 trillion worldwide market with little government scrutiny.

Under such contracts, the buyers agree to pay premiums, as often as monthly, in return for the issuers' enforceable guarantee to pay agreed-upon sums if certain events occur. Most swaps revolve around whether a company or borrower will default on a credit line or loan or go into bankruptcy, but a swap can be a bet on anything.