reading fluency

[imron]

I think it's time to add 信用違約互換（CDS）to our lists.

Not for me. I already understand the term 信用違約互換 just as well as I understand the term Credit Default Swap (actually, probably even more so, because 違約 is far less ambiguous than the English word 'default').

[yonglin]

For me, a "credit default swap" is "some abstract thing that finance people deal with", possibly related to credit and default...

In fact, although I'm reasonably well-educated (half a doctorate in economics, in fact), my understanding of "derivative" until about 6 months or so ago was limited to "what you get when you differentiate a function". The reason I happened to learn that there was a different definition for "derivative" in finance was because I happen to have a significant other who works in the field. I generally don't read/collect information about these things because I have no interest in them. I'd be surprised if my disinterest was not shared by at least half of the world's English speaking population.

[Silent]

Though I agree that derivative is mostly used in math and mathematical finance, in my perception it is widely used in other scientific fields too. In general it's just anything that is derived from something else. Nevertheless, you don't need to know the terminology to understand the concept. You don't need to know anything about finance to understand that a CDS is something used to 'gamble' on price changes, just the same as you don't need to know anything about automotive or surgery to understand that a car is a thing used for transport and that open heart surgery is used to fix heart problems.

I'm not very news minded. Regularly I don't consume any news for days and if I do, I mostly read headlines only. Still, I feel CDS's have hit the news big time the last couple of years, even in the popular press. To me they seem pretty unavoidable.

[imron]

You don't need to know anything about finance to understand that a CDS is something used to 'gamble' on price changes

You can get this information completely from the article without needing to know or have any real understanding of what a CDS is. Not knowing the specifics of this term won't really impact the ability of anyone to understand that article, or other articles that talk about CDSs to a similar depth.

[jkhsu]

It does not mean you have to know how exactly it works. Just the same as most people don't know exactly how a car, computer, or open heart surgery work. Few however will claim that they don't fully understand what a car, computer or open heart surgery is if they read about a car crash, new computer software or a heart surgery that went wrong.

While I disagree with you that native English speakers are expected to know the definition of a CDS, I do agree with your statement that you need to know something about an unknown word. (BTW, I gave you a +1 for that.)

When one encounters an unknown term in an article, the real questions are:

1. What is a reasonable definition for the unknown term that doesn't affect one's overall comprehension of the article?

2. Does the content of the article give the reasonable definition for the unknown term?

After looking through many news articles, I have realized that most news articles actually explain terms that most people have trouble with. Even in the article I posted, the purpose of a CDS is clearly spelled out in the first two sentences:

Excerpt:

-----

European Union lawmakers agreed late Tuesday to legislation that will limit the ability of traders to bet against sovereigns using credit default swaps.

Restrictions on “naked” sovereign CDS that are not used to hedge a correlating exposure will mean it will “no longer be possible for a hedge fund to purchase CDS of sovereign debt without holding actual bonds of the countries involved,” said one EU lawmaker.

-----

Without knowing anything about a CDS and knowing that it's probably some sort of "financial instrument" from the topic of this article, I can determine from just those two sentences alone that:

1. A CDS can be used to bet against sovereigns.

2. A CDS is used to hedge a correlating exposure, which can be the holding of sovereign bonds. In other words, a CDS offers protection in the event the sovereign bonds default (or fail).

3. A "naked" sovereign CDS is a CDS that is not used to hedge a correlating exposure. In other words, hedge funds can buy a "naked" sovereign CDS without actually holding the bonds of that country. By doing this, they would be betting that these countries fail; which is essentially what #1 says.

4. The article is commenting on a new restriction that will prevent traders from purchasing a "naked" sovereign CDS.

At this point, my reasonable definition for CDS is that it is some type of "financial insurance or hedge" to protect against one's sovereign bond holdings. Additionally, hedge funds will buy "naked" sovereign CDS to bet that a country will default on their bonds. That to me is a good enough definition to understand this article, assumming that CDS is the only unknown word. [i know that CDS can apply to corporate bonds as well but since this article is just talking about sovereigns, this definition is enough.]

The reason why I took away 3 additional words (sovereign, hedge, and hedge fund) in my example is because I thought people could guess what CDS means just from the article. For the record, I read the title and looked up CDS before I even read the article.

In summary, while I still believe not knowing a few words can affect one's comprehension of a news article, the majority of news articles actually define these words in the content. I tried looking for health, tech, etc. articles also and everytime there was a term that most people don't know, the article usually defines it in some way. I am sure there are counterexamples but I'm thinking they are outliers.

@imron - You're like a mind reader. I just finished writing this article and saw your post.

[Silent]

In summary, while I still believe not knowing a few words can affect one's comprehension of a news article, the majority of news articles actually define these words in the content. I tried looking for health, tech, etc. articles also and everytime there was a term that most people don't know, the article usually defines it in some way. I am sure there are counterexamples but I'm thinking they are outliers.

Exactly, it can affect comprehension, but not necessarily does affect comprehension. Hence my earlier correction that 2% of words missing does not mean that 2% or more info is missing but somewhere between 0% and a lot. It just depends on how elaborate the text is written and how key the words are that you're missing. Text is written with a certain reader in mind. If words are used that the intended public is expected not to know it will most of the time be explained as noted by you and Imron. Consequently someone only reading material for which he's the intended reader seldom needs a dictionary. It's when people 'study' because they move into new subjects where they are not the target audience and lack knowledge that the guessing game and dictionary come in handy.

I feel however that the explanation is not too relevant here. I mean this is about study and learning through reading native material. Consequently we are not the intended public for the material and have no reason to expect explanations embedded in the text for the words we don't know. There's no reason for the writer to elaborate on the words that are hard for us students. Still, often a lot of information can be derived from the surrounding text provided you do understand the surrounding text.

[Guest realmayo]

Agree.

After looking through many news articles, I have realized that most news articles actually explain terms that most people have trouble with

Only for words that native speakers might not know. Surely we're talking about reading texts in a foreign language? Where you don't know as much as native speakers (readers) do? Using examples of words native speakers struggle with is not a suitable comparison for texts which contain words which native speakers do know but foreign students of that language may well not yet have learned.

Also, reading the descriptions of CDS here make me chuckle: they're accurate enough but CDS and derivatives in general are still often misrepresented in the press, even the non-specialist financial press, which just goes to show how knowing a dictionary definition of a word isn't always going to help your comprehension.

On a similar note: using "sovereign" as a noun to mean, basically, a country in this context, is a fairly specialised usage: I imagine it would trip up plenty of native speakers for a moment or two, again suggesting that reading a broad range of material and getting comfortable with a range of nuances and meanings must be part of any "reading fluency".

[c_redman]

On a similar note: using "sovereign" as a noun to mean, basically, a country in this context, is a fairly specialised usage

Thanks. The only usage I knew that remotely made sense was a British gold coin. Maybe highly technical news articles like this are too dense with special terms to be a test for general fluency.

[Guest realmayo]

I assume the reason this word is used in preference to "government" sometimes is that governments can come and go but the debt they issued when in power does not vanish when they do....

[creamyhorror]

On a similar note: using "sovereign" as a noun to mean, basically, a country in this context, is a fairly specialised usage: I imagine it would trip up plenty of native speakers for a moment or two, again suggesting that reading a broad range of material and getting comfortable with a range of nuances and meanings must be part of any "reading fluency".

Indeed. That's one of the enduring problems with simple quantitative measurements of comprehension like "98%": words often have secondary meanings that the reader may not know, and the reader may or may not be able to make instant inferences about these words' meaning in context. There are a range of shades of grey with respect to "understanding a term as it is used". While the term "sovereign" isn't completely mysterious since the meaning-in-context is related to its original meaning ("a ruler or ruling power of a nation"), the notion of "betting against a sovereign"* will no doubt be foreign to most native speakers who don't often read about finance.

(* = making a trade that will profit from a decrease in the creditworthiness of the debt (bonds) issued by a sovereign government)

Maybe we can consider the 98% to be defined by "relative automatic recognition of the word's intended meaning". Anything less that impedes understanding of the passage and reading fluency, hindering the ability to carry out fast, extensive reading.

[Silent]

I assume the reason this word is used in preference to "government" sometimes is that governments can come and go but the debt they issued when in power does not vanish when they do....

I wouldn't interpret sovereign as a government, merely as a nation, state or country. To me sovereign is far more confusing then CDS. I suspect it's historical. In the past the sovereign and the 'state/nation' were essentially synonyms, the same legal entity. As I see it it's not betting against a country, but against a bond. As there are many different types of bond with their own risks/behaviour traders want to differentiate between Corporates, Municipality, sovereigns and probably a bunch more depending on the (type of) issuer. So they bet against a bond issued by a 'sovereign'. In an environment where these differentiations are made continually it's not strange that they're abbreviated to the distinctive part, sovereigns, corporates and muni's.

[Guest realmayo]

Consider a bond guaranteed by a government (but issued by another entity): that would be a government debt, but not sovereign debt.