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The Handbook of Fixed Income Securities, Eighth Edition, 8th Edition by Steven V. Mann, Frank J. Fabozzi

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CHAPTERSIXTY-SIXCREDIT DERIVATIVES

DOMINIC O’KANE, D.PHIL. (OXON)

Affiliated Professor of FinanceEDHEC Business School

Since the turn of the century, the credit derivatives market has become the main destination for those wishing to hedge credit risk and those looking for credit-based investments not available in the traditional cash credit markets. Two products dominate. The first is the single-name credit default swap (CDS), which transfers the default risk of a specific corporate or sovereign. The second is the CDS index, essentially a portfolio of CDS packaged into a single transaction. Together they constitute over 90% of all credit derivative transactions.

The purpose of this chapter is to set out a comprehensive description of the CDS ...

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