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Credit Derivatives
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| | Derivative instruments created to separate the [[Credit Risk|credit risk]] of a borrower from overall [[Market Risk|market risk]]. A purchaser of a [[Bond|bond]] might buy a credit derivative to cover the risk of the bond's debtor defaulting. Effectively the seller or writer of the credit derivative is providing an insurance policy against [[Default|default]]. Credit derivatives can provide cover against a sudden widening of the bond's [[Yield|yield]] [[Spread|spread]] over [[Benchmark|benchmark]] government bonds, a deepening of its price [[Discount|discount]], [[Bankruptcy|bankruptcy]], insolvency or default. | | Derivative instruments created to separate the [[Credit Risk|credit risk]] of a borrower from overall [[Market Risk|market risk]]. A purchaser of a [[Bond|bond]] might buy a credit derivative to cover the risk of the bond's debtor defaulting. Effectively the seller or writer of the credit derivative is providing an insurance policy against [[Default|default]]. Credit derivatives can provide cover against a sudden widening of the bond's [[Yield|yield]] [[Spread|spread]] over [[Benchmark|benchmark]] government bonds, a deepening of its price [[Discount|discount]], [[Bankruptcy|bankruptcy]], insolvency or default. |
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| - | See also: [[Derivatives]], [[Toxic Assets]], [[Collateralised Debt Obligation]], [[Credit Default Swap]], Synthetic CDO | + | See also: [[Derivatives]], [[Toxic Assets]], [[Collateralised Debt Obligation]], [[Credit Default Swap]], [[Synthetic CDO]] |
Current revision
Derivative instruments created to separate the credit risk of a borrower from overall market risk. A purchaser of a bond might buy a credit derivative to cover the risk of the bond's debtor defaulting. Effectively the seller or writer of the credit derivative is providing an insurance policy against default. Credit derivatives can provide cover against a sudden widening of the bond's yield spread over benchmark government bonds, a deepening of its price discount, bankruptcy, insolvency or default.
See also: Derivatives, Toxic Assets, Collateralised Debt Obligation, Credit Default Swap, Synthetic CDO