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Credit Derivative |
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Credit Derivative What Does Credit Derivative Mean? Privately held negotiable bilateral contracts that enable their users to manage their exposure to credit risk. Credit derivatives are financial assets like forward contracts, swaps, and options for which the price is driven by the credit risk of economic agents (private investors or governments). Investopedia explains Credit Derivative As an example, a bank concerned that one of its customers may not be able to repay a loan can protect itself against loss from default by transferring the credit risk to another party while keeping the loan on its books. Related Terms: How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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Most credit derivatives do not qualify for hedge accounting treatment, which would permit the gain or loss on the credit derivative to be reported in the same period as the gain or loss on the position being hedged, assuming the hedge is effective. The ability for investors to evaluate the market risk of their credit derivative portfolios will be increasingly important," said John Schiavetta, Group Managing Director, Derivative Fitch. BISYS Alternative Investment Services, a leading global provider of administrative, accounting and tax services for the hedge fund and private equity industry, today announced a new strategic partnership with T-Zero, a credit derivative market leader in trade affirmation. |
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