64

Introduction to Credit Derivatives

In this chapter we introduce and review the market in credit derivatives, which are a relatively new instrument but have grown in importance fairly rapidly. They are increasingly common instruments, and are closely connected with the global market in corporate debt. Events associated with the Russian bond market in 1998 and subsequent bond market volatility led to a greater emphasis on the reduction and control of credit risk exposure, and credit derivatives are one way for banks to manage their credit risk.

64.1 Overview

64.1.1 Introduction

The emergence of a market in credit derivatives is one of the most important recent developments in financial risk management. Credit derivatives offer bankers a new way to ...

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