| Derivatives Introduction |
| Types of Derivatives |
| Equity Derivatives |
| Credit Derivatives |
| Fixed Income |
| Interest Rate Derivatives |
| Foreign Exchange Derivatives |
Credit Derivatives
Credit Derivatives are the contract where the payoff depends on the credit worthiness
of one or more commercial or sovereign entities.
Credit derivatives is the fastest growing derivative market, surging
52 percent in the first half of 2006 to $26 trillion globally. The growth
of the market has made many regulators and investors nervous, with some
arguing that in the event the credit cycle turns, and bankruptcies pick
up, credit derivatives may pose systemic risks to other markets. Some
investors also believe the market, which in many cases is now more liquid
than the debt the derivatives are based on, is also used by hedge funds
to trade on inside information.
The types of the credit derivatives are