22

MANAGING CREDIT RISK

22.1 Hedging default risk

22.2 Hedging credit risk

22.3 Generating income

22.4 Trading strategies using CDS

22.5 Implementing directional views

22.6 Monetising relative credit views

22.7 Basis trades

22.8 Curve trades

22.9 Index trades

Chapter 14 has already charted the dramatic growth and development of the credit derivatives market from small beginnings in the mid-1990s to become the world’s second largest derivatives market just ten years later. Part of this explosive growth was because credit derivatives served a need that was hitherto unaddressed – a derivative product tailored specifically to help banks and investors hedge their exposure to credit risk. However, the major spur to growth came from new opportunities ...

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