Credit Derivatives Get Riskier in '06

O'Leary, Christopher
December 2005
Investment Dealers' Digest;12/5/2005, Vol. 71 Issue 46, p13
Trade Publication
The article reports that according to Fitch Ratings survey, the notional value credit derivative markets has surpassed the value of the U.S. corporate bond market. Increased focus of the hedge funds on the high-yield credit derivatives market is one of the reasons for the growth of credit derivative market. High-risk investors are growing dissatisfied with top quality derivatives. This trend poses a challenge to the high-yield traders and investors in the year 2006. An increase in lower rated derivatives creates a greater potential for market volatility. The survey revealed that the explosive growth in credit derivatives was dominated by single-name credit derivatives. Banks are using credit derivatives as a protective hedge.


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