Credit derivative


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Related to Credit derivative: Credit default swap

Credit derivative

Financial instruments in which the payoffs depend on the credit risk of companies or government entities, other than the counterparties to the credit derivative transaction itself.

Credit Derivative

Any derivative that allows an investor to hedge its credit risk. For example, if a brokerage is concerned that a client may be unable to pay a margin call, it may transfer this risk to another investor in exchange for paying a fee. Regular derivatives, like forward contracts and options, may be used as credit derivatives, depending on the credit risk of an investor's other positions.
References in periodicals archive ?
During August 2005, however, Federal Reserve Bank of New York President Timothy Geithner invited fourteen major credit derivative dealers to a meeting to discuss CDS operations issues, with particular attention to confirmation backlogs.
Given the rapid growth of the credit derivatives market, it may be fortunate that one of the most widely used complex credit derivative structures, the CDO tranche, is a mature product has already been through a stressful credit cycle.
Credit derivative modeling will be looked at in more detail later, but some credit models have incorporated aggregate economic variables as potential explanatory drivers of credit conditions.
In practice, IFRS issuers provide less disclosure of notional values for credit derivatives, as compared to companies under GAAP.
In designing our own credit derivatives, we will start with the simple products.
In September, a principal from one of the largest hedge funds involved in credit derivatives told an audience of professional risk managers that in 2007 and 2008 there will be a serious shakeout among hedge funds, broker dealers, and banks involved in creating credit derivatives and CSFFs.
Accordingly, firms using the fair value option could mark to market both the credit derivative and the hedged position and report changes in their fair values in current earnings.
The net payment is the same as the physically settled credit derivative contract, but it is more convenient, as there is no exchange of assets.
The variety of credit derivative contract forms can obscure the common role of these contracts as mechanisms to transfer credit risk between counterparties and the returns for bearing this category of risk.
The people who brought you the collapse of Barings and the Orange County debacle in the states are working hard on a new production - credit derivatives.
The invitation to tender follows other recent measures to ensure the DC process remains robust and continues to be a viable long-term solution for the credit derivatives market.
The full 'Annual Credit Derivatives Survey' is available at 'www.