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 ?
In practice, IFRS issuers provide less disclosure of notional values for credit derivatives, as compared to companies under GAAP.
AIG admitted that some of the credit derivative transactions
generally accepted accounting principles, credit derivatives are generally required to be recognized as an asset or liability and measured at fair value, and the gain or loss resulting from the change in fair value must be recorded in earnings.
Being the underlying asset of synthetic securitizations, it is important to produce a basic taxonomy of credit derivative instruments.
Thus, traditional loan loss provisioning combined with investing provisions in default-free securities can duplicate the benefits of a credit derivative. The difference is that the credit derivative delivers cash flows on a just-in-time basis, while the provisioning strategy retains cash inventories.
The absence of credit derivatives has restricted the development of China's financial markets," Gao said Monday a NAFMII report released July 23, the CDS pilot project will be a type of credit risk mitigation (CRM) contract or obligation.
Table 1 shows the credit derivative breakdown by product type.
One of the "unintended consequences" Bair probably was not thinking about when she made that statement was the extent to which the easy money policy followed by the Federal Open Market Committee between 2000 and 2003 has created a vast speculative bubble in markets from real estate to credit derivatives. Fact is, regulators, legislators, and even bankers themselves feel an increasing sense of urgency regarding Basel II, if for no other reason than there are so many other pressing issues requiring attention--issues which the delay of Basel II implementation in the United States has effectively blocked.
Credit events: Contrary to an insurance policy, the settlement of a credit derivative is not triggered by an actual loss incurred by the protection buyer but by the occurrence of credit events previously agreed upon.
On June 24th this year, CFTC Chairman Giancarlo, Securities and Exchange Commission Chairman Jay Clayton, and the U.K.s Financial Conduct Authority Chief Executive Andrew Bailey issued a joint statement regarding their concerns in credit derivatives markets.
BGC's Financial Services offerings include fixed income securities, interest rate swaps, foreign exchange, equities, equity derivatives, credit derivatives, commodities, futures, and structured products.
A series of money managers, including Omega Advisors and Och-Ziff Capital Management Group, had bought credit derivatives on the SRAC unit, and wanted Sears Holdings to auction off normally worthless debt linked to the entity.