Credit derivative

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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 ?
The EMEA DC resolved potentially to hold an auction in respect of the relevant transactions entered into using the 2003 Definitions (being those transactions that are subject to the Small Bang Protocol or that otherwise incorporate the 2009 ISDA Credit Derivatives Determinations Committees, auction settlement and restructuring supplement).
The Effect of Credit Derivatives Usage on the Risk of European Banks
96 trillion in maximum notional payouts for credit derivatives relate to the $875 billion in gross fair values of all derivative liabilities?
In designing our own credit derivatives, we will start with the simple products.
The FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance and cash flows of the sellers of credit derivatives.
Credit derivative strategies; new thinking on managing risk and return.
Why do credit derivatives matter to financial markets?
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.
Unfortunately, some managers might use fewer credit derivatives to reduce credit risk due to this potential earnings volatility.
The Italian bank will utilise Tamesis Risk Informer to manage its global credit derivatives operations by managing risk and decision making processes.
The use of credit derivatives among service and industrial corporates is growing rapidly as more and more companies are using them to hedge their credit risk exposures.
The prices are provided directly from GFI's global credit derivatives brokerage desks and represent the actual levels at which market participants are willing to trade.