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class="vector-toc-text"> <span class="vector-toc-numb">2</span> <span>Types</span> </div> </a> <button aria-controls="toc-Types-sublist" class="cdx-button cdx-button--weight-quiet cdx-button--icon-only vector-toc-toggle"> <span class="vector-icon mw-ui-icon-wikimedia-expand"></span> <span>Toggle Types subsection</span> </button> <ul id="toc-Types-sublist" class="vector-toc-list"> <li id="toc-Key_unfunded_credit_derivative_products" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Key_unfunded_credit_derivative_products"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.1</span> <span>Key unfunded credit derivative products</span> </div> </a> <ul id="toc-Key_unfunded_credit_derivative_products-sublist" class="vector-toc-list"> <li id="toc-Credit_default_swap" class="vector-toc-list-item vector-toc-level-3"> <a class="vector-toc-link" href="#Credit_default_swap"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.1.1</span> <span>Credit default swap</span> </div> </a> <ul id="toc-Credit_default_swap-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Total_return_swap" class="vector-toc-list-item vector-toc-level-3"> <a class="vector-toc-link" href="#Total_return_swap"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.1.2</span> <span>Total return swap</span> </div> </a> <ul id="toc-Total_return_swap-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-Key_funded_credit_derivative_products" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Key_funded_credit_derivative_products"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.2</span> <span>Key funded credit derivative products</span> </div> </a> <ul id="toc-Key_funded_credit_derivative_products-sublist" class="vector-toc-list"> <li id="toc-Credit_linked_notes" class="vector-toc-list-item vector-toc-level-3"> <a class="vector-toc-link" href="#Credit_linked_notes"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.2.1</span> <span>Credit linked notes</span> </div> </a> <ul id="toc-Credit_linked_notes-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Collateralized_debt_obligations" class="vector-toc-list-item vector-toc-level-3"> <a class="vector-toc-link" href="#Collateralized_debt_obligations"> <div class="vector-toc-text"> <span class="vector-toc-numb">2.2.2</span> <span>Collateralized debt obligations</span> </div> </a> <ul id="toc-Collateralized_debt_obligations-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> </ul> </li> <li id="toc-Pricing" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Pricing"> <div class="vector-toc-text"> <span class="vector-toc-numb">3</span> <span>Pricing</span> </div> </a> <ul id="toc-Pricing-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Risks" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Risks"> <div class="vector-toc-text"> <span class="vector-toc-numb">4</span> <span>Risks</span> </div> </a> <ul id="toc-Risks-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-See_also" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#See_also"> <div class="vector-toc-text"> <span class="vector-toc-numb">5</span> <span>See also</span> </div> </a> <ul id="toc-See_also-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Notes_and_references" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Notes_and_references"> <div class="vector-toc-text"> <span class="vector-toc-numb">6</span> <span>Notes and references</span> </div> </a> <ul id="toc-Notes_and_references-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-External_links" class="vector-toc-list-item vector-toc-level-1 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mw-list-item"><a href="https://az.wikipedia.org/wiki/Kredit_derivativi" title="Kredit derivativi – Azerbaijani" lang="az" hreflang="az" data-title="Kredit derivativi" data-language-autonym="Azərbaycanca" data-language-local-name="Azerbaijani" class="interlanguage-link-target"><span>Azərbaycanca</span></a></li><li class="interlanguage-link interwiki-ca mw-list-item"><a href="https://ca.wikipedia.org/wiki/Derivats_de_cr%C3%A8dit" title="Derivats de crèdit – Catalan" lang="ca" hreflang="ca" data-title="Derivats de crèdit" data-language-autonym="Català" data-language-local-name="Catalan" class="interlanguage-link-target"><span>Català</span></a></li><li class="interlanguage-link interwiki-de mw-list-item"><a href="https://de.wikipedia.org/wiki/Kreditderivat" title="Kreditderivat – German" lang="de" hreflang="de" data-title="Kreditderivat" data-language-autonym="Deutsch" data-language-local-name="German" class="interlanguage-link-target"><span>Deutsch</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Derivados_de_cr%C3%A9dito" title="Derivados de crédito – Spanish" lang="es" hreflang="es" data-title="Derivados de crédito" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-fa mw-list-item"><a href="https://fa.wikipedia.org/wiki/%D9%85%D8%B4%D8%AA%D9%82%D8%A7%D8%AA_%D8%A7%D8%B9%D8%AA%D8%A8%D8%A7%D8%B1%DB%8C" title="مشتقات اعتباری – Persian" lang="fa" hreflang="fa" data-title="مشتقات اعتباری" data-language-autonym="فارسی" data-language-local-name="Persian" class="interlanguage-link-target"><span>فارسی</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/D%C3%A9riv%C3%A9_de_cr%C3%A9dit" title="Dérivé de crédit – French" lang="fr" hreflang="fr" data-title="Dérivé de crédit" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-lt mw-list-item"><a href="https://lt.wikipedia.org/wiki/I%C5%A1vestin%C4%97_kredito_priemon%C4%97" title="Išvestinė kredito priemonė – Lithuanian" lang="lt" hreflang="lt" data-title="Išvestinė kredito priemonė" data-language-autonym="Lietuvių" data-language-local-name="Lithuanian" class="interlanguage-link-target"><span>Lietuvių</span></a></li><li class="interlanguage-link interwiki-mk mw-list-item"><a href="https://mk.wikipedia.org/wiki/%D0%9A%D1%80%D0%B5%D0%B4%D0%B8%D1%82%D0%B5%D0%BD_%D0%B4%D0%B5%D1%80%D0%B8%D0%B2%D0%B0%D1%82" title="Кредитен дериват – Macedonian" lang="mk" hreflang="mk" data-title="Кредитен дериват" data-language-autonym="Македонски" data-language-local-name="Macedonian" class="interlanguage-link-target"><span>Македонски</span></a></li><li class="interlanguage-link interwiki-ja mw-list-item"><a href="https://ja.wikipedia.org/wiki/%E3%82%AF%E3%83%AC%E3%82%B8%E3%83%83%E3%83%88%E3%83%87%E3%83%AA%E3%83%90%E3%83%86%E3%82%A3%E3%83%96" title="クレジットデリバティブ – Japanese" lang="ja" hreflang="ja" data-title="クレジットデリバティブ" data-language-autonym="日本語" data-language-local-name="Japanese" class="interlanguage-link-target"><span>日本語</span></a></li><li class="interlanguage-link interwiki-sk mw-list-item"><a href="https://sk.wikipedia.org/wiki/Kreditn%C3%BD_deriv%C3%A1t" title="Kreditný derivát – Slovak" lang="sk" hreflang="sk" data-title="Kreditný derivát" data-language-autonym="Slovenčina" data-language-local-name="Slovak" class="interlanguage-link-target"><span>Slovenčina</span></a></li><li class="interlanguage-link interwiki-sv mw-list-item"><a href="https://sv.wikipedia.org/wiki/Kreditderivat" title="Kreditderivat – Swedish" lang="sv" hreflang="sv" data-title="Kreditderivat" data-language-autonym="Svenska" data-language-local-name="Swedish" 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rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><table class="sidebar nomobile nowraplinks plainlist"><tbody><tr><td class="sidebar-pretitle">Part of a series on</td></tr><tr><th class="sidebar-title-with-pretitle"><a href="/wiki/Financial_market" title="Financial market">Financial markets</a></th></tr><tr><td class="sidebar-image"><span class="notpageimage" typeof="mw:File"><a href="/wiki/File:Philippine-stock-market-board.jpg" class="mw-file-description"><img alt="Looking up at a computerized stocks-value board at the Philippine Stock Exchange" src="//upload.wikimedia.org/wikipedia/commons/thumb/d/d7/Philippine-stock-market-board.jpg/200px-Philippine-stock-market-board.jpg" decoding="async" width="200" height="150" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/d/d7/Philippine-stock-market-board.jpg/300px-Philippine-stock-market-board.jpg 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/d/d7/Philippine-stock-market-board.jpg/400px-Philippine-stock-market-board.jpg 2x" data-file-width="640" data-file-height="480" /></a></span></td></tr><tr><td class="sidebar-above" style="padding-bottom:0.7em;"> <ul><li><a href="/wiki/Market_(economics)" title="Market (economics)">Public market</a></li> <li><a href="/wiki/Exchange_(organized_market)" title="Exchange (organized market)">Exchange</a> <b>·</b> <a href="/wiki/Security_(finance)" title="Security (finance)">Securities</a></li></ul></td></tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Bond_market" title="Bond market">Bond market</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Bond_valuation" title="Bond valuation">Bond valuation</a></li> <li><a href="/wiki/Corporate_bond" title="Corporate bond">Corporate bond</a></li> <li><a href="/wiki/Fixed_income" title="Fixed income">Fixed income</a></li> <li><a href="/wiki/Government_bond" title="Government bond">Government bond</a></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Municipal_bond" title="Municipal bond">Municipal bond</a></li> <li><br /><a href="/wiki/Securitization" title="Securitization">Securitization</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Stock_market" title="Stock market">Stock market</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Common_stock" title="Common stock">Common stock</a></li> <li><a href="/wiki/Growth_stock" title="Growth stock">Growth stock</a></li> <li><a href="/wiki/Preferred_stock" title="Preferred stock">Preferred stock</a></li> <li><a href="/wiki/Registered_share" title="Registered share">Registered share</a></li> <li><a href="/wiki/Shareholder" title="Shareholder">Shareholder</a></li> <li><a href="/wiki/Stock" title="Stock">Stock</a></li> <li><a href="/wiki/Stockbroker" title="Stockbroker">Stockbroker</a></li> <li><a href="/wiki/Stock_certificate" title="Stock certificate">Stock certificate</a></li> <li><a href="/wiki/Stock_exchange" title="Stock exchange">Stock exchange</a></li> <li><a href="/wiki/Watered_stock" title="Watered stock">Watered stock</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> Other markets</th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <div style="display:inline-block; padding:0.2em 0.4em; line-height:1.2em; line-height:1.25em;"><a href="/wiki/Derivatives_market" title="Derivatives market">Derivatives</a> <div class="hlist"><ul><li>(<a class="mw-selflink selflink">Credit derivative</a></li><li><a href="/wiki/Futures_exchange" title="Futures exchange">Futures exchange</a></li><li><a href="/wiki/Hybrid_security" title="Hybrid security">Hybrid security</a>)</li></ul></div> </div> <div style="display:inline-block; padding:0.2em 0.4em; line-height:1.2em; line-height:1.25em;padding-bottom:0.25em;"><a href="/wiki/Foreign_exchange_market" title="Foreign exchange market">Foreign exchange</a> <div class="hlist"><ul><li>(<a href="/wiki/Currency" title="Currency">Currency</a></li><li><a href="/wiki/Exchange_rate" title="Exchange rate">Exchange rate</a>)</li></ul></div> </div> <ul><li><a href="/wiki/Commodity_market" title="Commodity market">Commodity</a></li> <li><a href="/wiki/Exchange-traded_fund" title="Exchange-traded fund">ETF</a></li> <li><a href="/wiki/Money_market" title="Money market">Money</a></li> <li><a href="/wiki/Mutual_fund" title="Mutual fund">Mutual fund</a></li> <li><a href="/wiki/Option_(finance)" title="Option (finance)">Option</a></li> <li><a href="/wiki/Real_estate" title="Real estate">Real estate</a></li> <li><a href="/wiki/Reinsurance" title="Reinsurance">Reinsurance</a></li> <li><a href="/wiki/Structured_product" title="Structured product">Structured product</a></li> <li><a href="/wiki/Swap_(finance)" title="Swap (finance)">Swap (finance)</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Alternative_investment" title="Alternative investment">Alternative investment</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Private_equity" title="Private equity">Private equity</a></li> <li><a href="/wiki/Private_credit" title="Private credit">Private credit</a></li> <li><a href="/wiki/Leveraged_buyout" title="Leveraged buyout">Leveraged buyout</a></li> <li><a href="/wiki/Venture_capital" title="Venture capital">Venture</a></li> <li><a href="/wiki/Growth_capital" title="Growth capital">Growth</a></li> <li><a href="/wiki/Private_equity_secondary_market" class="mw-redirect" title="Private equity secondary market">Secondaries</a></li> <li><a href="/wiki/Special-purpose_acquisition_company" title="Special-purpose acquisition company">SPAC</a></li> <li><a href="/wiki/Carried_Interest" class="mw-redirect" title="Carried Interest">Carried Interest</a></li> <li><a href="/wiki/Leverage_(finance)" title="Leverage (finance)">Leveraged finance</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Over-the-counter_(finance)" title="Over-the-counter (finance)">Over-the-counter (off-exchange)</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <div class="hlist"><ul><li><a href="/wiki/Forward_contract" title="Forward contract">Forwards</a></li><li><a href="/wiki/Option_(finance)" title="Option (finance)">Options</a></li></ul></div> <div class="hlist"><ul><li><a href="/wiki/Spot_market" title="Spot market">Spot market</a></li><li><a href="/wiki/Swap_(finance)" title="Swap (finance)">Swaps</a></li></ul></div></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> <a href="/wiki/Trader_(finance)" title="Trader (finance)">Trading</a></th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Financial_market_participants" title="Financial market participants">Participants</a></li> <li><a href="/wiki/Financial_regulation" title="Financial regulation">Regulation</a></li> <li><a href="/wiki/Clearing_(finance)" title="Clearing (finance)">Clearing</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ddddff;"> Related areas</th></tr><tr><td class="sidebar-content hlist" style="padding:0.15em 0.5em 0.7em;"> <ul><li><a href="/wiki/Asset_management" title="Asset management">Asset management</a></li> <li><a href="/wiki/Bank" title="Bank">Banks and banking</a></li> <li><a href="/wiki/Bull_(stock_market_speculator)" title="Bull (stock market speculator)">Bulls</a> and <a href="/wiki/Market_trend#Bear_market)" title="Market trend">Bears</a></li> <li><a href="/wiki/Diversification_(finance)" title="Diversification (finance)">Diversification</a></li> <li><a href="/wiki/Environmental,_social,_and_governance" title="Environmental, social, and governance">ESG</a> <ul><li><a href="/wiki/Climate_finance" title="Climate finance">Climate finance</a></li> <li><a href="/wiki/Eco-investing" title="Eco-investing">Eco-investing</a></li> <li><a href="/wiki/Impact_investing" title="Impact investing">Impact investing</a></li> <li><a href="/wiki/Sustainable_finance" title="Sustainable finance">Sustainable finance</a></li> <li><a href="/wiki/Greenwashing" title="Greenwashing">Greenwashing</a></li></ul></li> <li><a href="/wiki/Fintech" title="Fintech">Fintech</a></li> <li><a href="/wiki/Investment_management" title="Investment management">Investment management</a></li> <li><a href="/wiki/Market_risk" title="Market risk">Market risk</a></li> <li><a href="/wiki/Market_trend" title="Market trend">Market trend</a></li> <li><a href="/wiki/Speculative_attack" title="Speculative attack">Speculative attack</a></li></ul></td> </tr><tr><td class="sidebar-navbar" style="border-top:1px solid #aaa;"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><style data-mw-deduplicate="TemplateStyles:r1239400231">.mw-parser-output .navbar{display:inline;font-size:88%;font-weight:normal}.mw-parser-output .navbar-collapse{float:left;text-align:left}.mw-parser-output .navbar-boxtext{word-spacing:0}.mw-parser-output .navbar ul{display:inline-block;white-space:nowrap;line-height:inherit}.mw-parser-output .navbar-brackets::before{margin-right:-0.125em;content:"[ "}.mw-parser-output .navbar-brackets::after{margin-left:-0.125em;content:" ]"}.mw-parser-output .navbar li{word-spacing:-0.125em}.mw-parser-output .navbar a>span,.mw-parser-output .navbar a>abbr{text-decoration:inherit}.mw-parser-output .navbar-mini abbr{font-variant:small-caps;border-bottom:none;text-decoration:none;cursor:inherit}.mw-parser-output .navbar-ct-full{font-size:114%;margin:0 7em}.mw-parser-output .navbar-ct-mini{font-size:114%;margin:0 4em}html.skin-theme-clientpref-night .mw-parser-output .navbar li a abbr{color:var(--color-base)!important}@media(prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .navbar li a abbr{color:var(--color-base)!important}}@media print{.mw-parser-output .navbar{display:none!important}}</style><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Financial_markets" title="Template:Financial markets"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Financial_markets" title="Template talk:Financial markets"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Financial_markets" title="Special:EditPage/Template:Financial markets"><abbr title="Edit this template">e</abbr></a></li></ul></div></td></tr></tbody></table> <p>In <a href="/wiki/Finance" title="Finance">finance</a>, a <b>credit derivative</b> refers to any one of "various instruments and techniques designed to separate and then transfer the <i><a href="/wiki/Credit_risk" title="Credit risk">credit risk</a></i>"<sup id="cite_ref-Econ1_1-0" class="reference"><a href="#cite_note-Econ1-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> or the risk of an event of default of a corporate or sovereign borrower, transferring it to an entity other than the lender<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> or debtholder. </p><p>An unfunded credit derivative is one where credit protection is bought and sold between bilateral counterparties without the protection seller having to put up money upfront or at any given time during the life of the deal unless an event of default occurs. Usually these contracts are traded pursuant to an <a href="/wiki/International_Swaps_and_Derivatives_Association" title="International Swaps and Derivatives Association">International Swaps and Derivatives Association</a> (ISDA) master agreement. Most credit derivatives of this sort are <a href="/wiki/Credit_default_swap" title="Credit default swap">credit default swaps</a>. If the credit derivative is entered into by a financial institution or a <a href="/wiki/Special_purpose_vehicle" class="mw-redirect" title="Special purpose vehicle">special purpose vehicle</a> (SPV) and payments under the credit derivative are funded using <a href="/wiki/Securitization" title="Securitization">securitization</a> techniques, such that a debt obligation is issued by the financial institution or SPV to support these obligations, this is known as a funded credit derivative. </p><p>This synthetic securitization process has become increasingly popular over the last decade, with the simple versions of these structures being known as synthetic <a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">collateralized debt obligations</a> (CDOs), <a href="/wiki/Credit-linked_note" title="Credit-linked note">credit-linked notes</a> or <a href="/wiki/Single-tranche_CDO" title="Single-tranche CDO">single-tranche CDOs</a>. In funded credit derivatives, transactions are often rated by rating agencies, which allows investors to take different slices of credit risk according to their risk appetite.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="History_and_participants">History and participants</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=1" title="Edit section: History and participants"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The historical antecedents of <a href="/wiki/Trade_credit_insurance" title="Trade credit insurance">trade credit insurance</a>, which <a href="/wiki/Trade_credit_insurance#History" title="Trade credit insurance">date back at least to the 1860s</a>, also presaged credit derivatives more indirectly. </p><p>The market in credit derivatives as defined in today's terms started from nothing in 1993 after having been pioneered by <a href="/wiki/J.P._Morgan" class="mw-redirect" title="J.P. Morgan">J.P. Morgan</a>'s Peter Hancock.<sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> By 1996 there was around $40 billion of outstanding transactions, half of which involved the <a href="/wiki/Debt_of_developing_countries" title="Debt of developing countries">debt of developing countries</a>.<sup id="cite_ref-Econ1_1-1" class="reference"><a href="#cite_note-Econ1-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p>Credit default products are the most commonly traded credit derivative product<sup id="cite_ref-BBACDR_5-0" class="reference"><a href="#cite_note-BBACDR-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> and include unfunded products such as <a href="/wiki/Credit_default_swap" title="Credit default swap">credit default swaps</a> and funded products such as <a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">collateralized debt obligations</a> (see further discussion below). </p><p>On May 15, 2007, in a speech concerning credit derivatives and liquidity risk, <a href="/wiki/Timothy_Geithner" title="Timothy Geithner">Timothy Geithner</a>, then President of the <a href="/wiki/Federal_Reserve_Bank_of_New_York" title="Federal Reserve Bank of New York">Federal Reserve Bank of New York</a>, stated: “Financial innovation has improved the capacity to measure and manage risk.” <sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> Credit market participants, regulators, and courts are increasingly using credit derivative pricing to help inform decisions about loan pricing, risk management, capital requirements, and legal liability. The ISDA<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> reported in April 2007 that total notional amount on outstanding credit derivatives was $35.1 trillion with a gross <a href="/wiki/Market_value" title="Market value">market value</a> of $948 billion (<a rel="nofollow" class="external text" href="http://www.isda.org">ISDA's Website</a>). As reported in <i><a href="/wiki/The_Times" title="The Times">The Times</a></i> on September 15, 2008, the "Worldwide credit derivatives market is valued at $62 trillion".<sup id="cite_ref-8" class="reference"><a href="#cite_note-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> </p><p>Although the credit <a href="/wiki/Derivatives_market" title="Derivatives market">derivatives market</a> is a global one, London has a market share of about 40%, with the rest of Europe having about 10%.<sup id="cite_ref-BBACDR_5-1" class="reference"><a href="#cite_note-BBACDR-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> </p><p>The main market participants are banks, hedge funds, insurance companies, pension funds, and other corporates.<sup id="cite_ref-BBACDR_5-2" class="reference"><a href="#cite_note-BBACDR-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="Types">Types</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=2" title="Edit section: Types"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Credit derivatives are fundamentally divided into two categories: funded credit derivatives and unfunded credit derivatives. </p><p>An <b>unfunded credit derivative</b> is a bilateral contract between two counterparties, where each party is responsible for making its payments under the contract (i.e., payments of premiums and any cash or physical settlement amount) itself without recourse to other assets. </p><p>A <b>funded credit derivative</b> involves the protection seller (the party that assumes the credit risk) making an initial payment that is used to settle any potential credit events. (The protection buyer, however, still may be exposed to the <i>credit risk</i> of the <i>protection seller</i> itself. This is known as counterparty risk.) </p><p>Unfunded credit derivative products include the following products: </p> <ul><li><a href="/wiki/Credit_default_swap" title="Credit default swap">Credit default swap</a> (CDS)</li> <li><a href="/wiki/Total_return_swap" title="Total return swap">Total return swap</a></li> <li><a href="/wiki/Constant_maturity_credit_default_swap" title="Constant maturity credit default swap">Constant maturity credit default swap</a> (CMCDS)</li> <li>First to Default Credit Default Swap</li> <li>Portfolio Credit Default Swap</li> <li>Secured Loan Credit Default Swap</li> <li>Credit Default Swap on Asset Backed Securities</li> <li>Credit default <a href="/wiki/Swaption" title="Swaption">swaption</a></li> <li>Recovery lock transaction</li> <li>Credit Spread Option</li> <li>CDS index products</li></ul> <p>Funded credit derivative products include the following products: </p> <ul><li><a href="/wiki/Credit-linked_note" title="Credit-linked note">Credit-linked note</a> (CLN)</li> <li>Synthetic <a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">collateralized debt obligation</a> (CDO)</li> <li><a href="/wiki/Constant_Proportion_Debt_Obligation" class="mw-redirect" title="Constant Proportion Debt Obligation">Constant Proportion Debt Obligation</a> (CPDO)</li> <li>Synthetic <a href="/wiki/Constant_proportion_portfolio_insurance" title="Constant proportion portfolio insurance">constant proportion portfolio insurance</a> (Synthetic CPPI)</li></ul> <div class="mw-heading mw-heading3"><h3 id="Key_unfunded_credit_derivative_products">Key unfunded credit derivative products</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=3" title="Edit section: Key unfunded credit derivative products"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <div class="mw-heading mw-heading4"><h4 id="Credit_default_swap">Credit default swap</h4><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=4" title="Edit section: Credit default swap"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1236090951">.mw-parser-output .hatnote{font-style:italic}.mw-parser-output div.hatnote{padding-left:1.6em;margin-bottom:0.5em}.mw-parser-output .hatnote i{font-style:normal}.mw-parser-output .hatnote+link+.hatnote{margin-top:-0.5em}@media print{body.ns-0 .mw-parser-output .hatnote{display:none!important}}</style><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Credit_default_swap" title="Credit default swap">Credit default swap</a></div> <p>The credit default swap or CDS has become the cornerstone product of the credit derivatives market. This product represents over thirty percent of the credit derivatives market.<sup id="cite_ref-BBACDR_5-3" class="reference"><a href="#cite_note-BBACDR-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> </p><p>The product has many variations, including where there is a basket or portfolio of reference entities, although fundamentally, the principles remain the same. A powerful recent variation has been gathering market share of late: credit default swaps which relate to asset-backed securities.<sup id="cite_ref-9" class="reference"><a href="#cite_note-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading4"><h4 id="Total_return_swap">Total return swap</h4><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=5" title="Edit section: Total return swap"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Total_return_swap" title="Total return swap">Total return swap</a></div> <div class="mw-heading mw-heading3"><h3 id="Key_funded_credit_derivative_products">Key funded credit derivative products</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=6" title="Edit section: Key funded credit derivative products"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <div class="mw-heading mw-heading4"><h4 id="Credit_linked_notes">Credit linked notes</h4><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=7" title="Edit section: Credit linked notes"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <figure class="mw-halign-right" typeof="mw:File/Thumb"><a href="/wiki/File:Securitization-en.PNG" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/thumb/3/33/Securitization-en.PNG/400px-Securitization-en.PNG" decoding="async" width="400" height="248" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/3/33/Securitization-en.PNG/600px-Securitization-en.PNG 1.5x, //upload.wikimedia.org/wikipedia/commons/3/33/Securitization-en.PNG 2x" data-file-width="644" data-file-height="400" /></a><figcaption>In this example coupons from the bank's portfolio of loans are passed to the SPV which uses the cash flow to service the credit linked notes.</figcaption></figure> <p>A credit linked note is a note whose cash flow depends upon an event, which may be a default, change in credit spread, or rating change. The definition of the relevant credit events must be negotiated by the parties to the note. </p><p>A CLN in effect combines a credit-default swap with a regular note (with coupon, maturity, redemption). Given its note-like features, a CLN is an on-balance-sheet asset, in contrast to a CDS. </p><p>Typically, an investment fund manager will purchase such a note to hedge against possible down grades, or loan defaults. </p><p>Numerous different types of credit linked notes (CLNs) have been structured and placed in the past few years. Here we are going to provide an overview rather than a detailed account of these instruments. </p><p>The most basic CLN consists of a bond, issued by a well-rated borrower, packaged with a credit default swap on a less creditworthy risk. </p><p>For example, a bank may sell some of its exposure to a particular emerging country by issuing a bond linked to that country's default or convertibility risk. From the bank's point of view, this achieves the purpose of reducing its exposure to that risk, as it will not need to reimburse all or part of the note if a credit event occurs. However, from the point of view of investors, the risk profile is different from that of the bonds issued by the country. If the bank runs into difficulty, their investments will suffer even if the country is still performing well. </p><p>The <a href="/wiki/Credit_rating" title="Credit rating">credit rating</a> is improved by using a proportion of government bonds, which means the CLN investor receives an enhanced coupon. </p><p>Through the use of a credit default swap, the bank receives some recompense if the reference credit defaults. </p><p>There are several different types of securitized product, which have a credit dimension. </p> <ul><li><a href="/wiki/Credit-linked_note" title="Credit-linked note">Credit-linked notes</a> (CLN): Credit-linked note is a generic name related to any bond whose value is linked to the performance of a reference asset, or assets. This link may be through the use of a credit derivative, but does not have to be.</li> <li><a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">Collateralized debt obligation</a> (CDO): Generic term for a bond issued against a mixed pool of assets—there also exists <a href="/wiki/CDO-Squared" title="CDO-Squared">CDO-Squared</a> (CDO^2) where the underlying assets are CDO tranches.</li> <li><a href="/w/index.php?title=Collateralized_bond_obligation&action=edit&redlink=1" class="new" title="Collateralized bond obligation (page does not exist)">Collateralized bond obligations</a> (CBO): Bond issued against a pool of bond assets or other securities. It is referred to in a generic sense as a CDO</li> <li><a href="/wiki/Collateralized_loan_obligation" title="Collateralized loan obligation">Collateralized loan obligations</a> (CLO): Bond issued against a pool of bank loan. It is referred to in a generic sense as a <b>CDO</b></li></ul> <p>CDO refers either to the pool of assets used to support the CLNs or the CLNs themselves. </p> <div class="mw-heading mw-heading4"><h4 id="Collateralized_debt_obligations">Collateralized debt obligations</h4><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=8" title="Edit section: Collateralized debt obligations"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">collateralized debt obligation</a></div> <p>Not all collateralized debt obligations (CDOs) are credit derivatives. For example, a CDO made up of loans is merely a securitizing of loans that is then tranched based on its credit rating. This particular securitization is known as a collateralized loan obligation (CLO) and the investor receives the cash flow that accompanies the paying of the debtor to the creditor. Essentially, a CDO is held up by a pool of assets that generate cash. A CDO only becomes a derivative when it is used in conjunction with credit default swaps (CDS), in which case it becomes a <a href="/wiki/Synthetic_CDO" title="Synthetic CDO">Synthetic CDO</a>. The main difference between CDOs and derivatives is that a derivative is essentially a bilateral agreement in which the payout occurs during a specific event which is tied to the underlying asset. </p><p>Other more complicated CDOs have been developed where each underlying credit risk is itself a CDO <a href="/wiki/Tranche" title="Tranche">tranche</a>. These CDOs are commonly known as CDOs-squared. </p> <div class="mw-heading mw-heading2"><h2 id="Pricing">Pricing</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=9" title="Edit section: Pricing"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Pricing of credit derivative is not an easy process. This is because: </p> <ul><li>The complexity in monitoring the market price of the underlying credit obligation.</li> <li>Understanding the creditworthiness of a debtor is often a cumbersome task as it is not easily quantifiable.</li> <li>The incidence of default is not a frequent phenomenon and makes it difficult for the investors to find the empirical data of a solvent company with respect to default.</li> <li>Even though one can take help of different ratings published by ranking agencies but often these ratings will be different.</li></ul> <div class="mw-heading mw-heading2"><h2 id="Risks">Risks</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=10" title="Edit section: Risks"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Risks involving credit derivatives are a concern among regulators of financial markets. The <a href="/wiki/US_Federal_Reserve" class="mw-redirect" title="US Federal Reserve">US Federal Reserve</a> issued several statements in the Fall of 2005 about these risks, and highlighted the growing backlog of confirmations for credit derivatives trades. These backlogs pose risks to the market (both in theory and in all likelihood), and they exacerbate other risks in the financial system. One challenge in <a href="/wiki/Regulation" title="Regulation">regulating</a> these and other derivatives is that the people who know most about them also typically have a vested <a href="/wiki/Incentive" title="Incentive">incentive</a> in encouraging their growth and lack of regulation. Incentive may be indirect, e.g., academics have not only consulting incentives, but also incentives in keeping open doors for research. </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=11" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Credit_default_swap" title="Credit default swap">Credit default swap</a></li> <li><a href="/wiki/Credit-linked_note" title="Credit-linked note">Credit-linked note</a></li> <li><a href="/wiki/Jarrow%E2%80%93Turnbull_model" title="Jarrow–Turnbull model">Jarrow–Turnbull model</a></li> <li><a href="/wiki/Merton_model" title="Merton model">Merton model</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="Notes_and_references">Notes and references</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=12" title="Edit section: Notes and references"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist reflist-columns references-column-width reflist-columns-2"> <ol class="references"> <li id="cite_note-Econ1-1"><span class="mw-cite-backlink">^ <a href="#cite_ref-Econ1_1-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-Econ1_1-1"><sup><i><b>b</b></i></sup></a></span> <span class="reference-text"><a href="/wiki/The_Economist" title="The Economist">The Economist</a> <i>Passing on the risks</i> 2 November 1996</span> </li> <li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFDas2005" 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Retrieved <span class="nowrap">2007-07-06</span></span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=British+Banker+Association+Credit+Derivatives+Report&rft.date=2006&rft_id=http%3A%2F%2Fwww.bba.org.uk%2Fcontent%2F1%2Fc4%2F76%2F71%2FCredit_derivative_report_2006_exec_summary.pdf&rfr_id=info%3Asid%2Fen.wikipedia.org%3ACredit+derivative" class="Z3988"></span></span> </li> <li id="cite_note-6"><span class="mw-cite-backlink"><b><a href="#cite_ref-6">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://www.newyorkfed.org/newsevents/speeches/2007/gei070515">"Liquidity Risk and the Global Economy: Remarks at the Federal Reserve Bank of Atlanta's 2007 Financial Markets Conference - Credit Derivatives, Sea Island, Georgia"</a>. May 15, 2007.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=Liquidity+Risk+and+the+Global+Economy%3A+Remarks+at+the+Federal+Reserve+Bank+of+Atlanta%27s+2007+Financial+Markets+Conference+-+Credit+Derivatives%2C+Sea+Island%2C+Georgia&rft.date=2007-05-15&rft_id=https%3A%2F%2Fwww.newyorkfed.org%2Fnewsevents%2Fspeeches%2F2007%2Fgei070515&rfr_id=info%3Asid%2Fen.wikipedia.org%3ACredit+derivative" class="Z3988"></span></span> </li> <li id="cite_note-7"><span class="mw-cite-backlink"><b><a href="#cite_ref-7">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="http://www.isda.org">"ISDA"</a>. April 2007.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=ISDA&rft.date=2007-04&rft_id=http%3A%2F%2Fwww.isda.org&rfr_id=info%3Asid%2Fen.wikipedia.org%3ACredit+derivative" class="Z3988"></span></span> </li> <li id="cite_note-8"><span class="mw-cite-backlink"><b><a href="#cite_ref-8">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFHoskingCostelloLeroux2008" class="citation news cs1">Hosking, Patrick; Costello, Miles; Leroux, Marcus (September 16, 2008). <a rel="nofollow" class="external text" href="https://web.archive.org/web/20080918005841/http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4761839.ece">"Dow dives as Federal Reserve lines up 75bn emergency loan for AIG"</a>. <i>The Times</i>. London. Archived from <a rel="nofollow" class="external text" href="http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4761839.ece">the original</a> on September 18, 2008<span class="reference-accessdate">. Retrieved <span class="nowrap">April 30,</span> 2010</span>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=The+Times&rft.atitle=Dow+dives+as+Federal+Reserve+lines+up+75bn+emergency+loan+for+AIG&rft.date=2008-09-16&rft.aulast=Hosking&rft.aufirst=Patrick&rft.au=Costello%2C+Miles&rft.au=Leroux%2C+Marcus&rft_id=http%3A%2F%2Fbusiness.timesonline.co.uk%2Ftol%2Fbusiness%2Findustry_sectors%2Fbanking_and_finance%2Farticle4761839.ece&rfr_id=info%3Asid%2Fen.wikipedia.org%3ACredit+derivative" class="Z3988"></span></span> </li> <li id="cite_note-9"><span class="mw-cite-backlink"><b><a href="#cite_ref-9">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFParkerPiracci2007" class="citation web cs1">Parker, Edmund; Piracci, Jamila (April 19, 2007). <a rel="nofollow" class="external text" href="https://web.archive.org/web/20110521170516/http://www.mayerbrown.com/london/article.asp?id=3517&nid=1575">"Documenting credit default swaps on asset backed securities"</a>. Mayer Brown. Archived from <a rel="nofollow" class="external text" href="http://www.mayerbrown.com/london/article.asp?id=3517&nid=1575">the original</a> on May 21, 2011.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=Documenting+credit+default+swaps+on+asset+backed+securities&rft.pub=Mayer+Brown&rft.date=2007-04-19&rft.aulast=Parker&rft.aufirst=Edmund&rft.au=Piracci%2C+Jamila&rft_id=http%3A%2F%2Fwww.mayerbrown.com%2Flondon%2Farticle.asp%3Fid%3D3517%26nid%3D1575&rfr_id=info%3Asid%2Fen.wikipedia.org%3ACredit+derivative" class="Z3988"></span></span> </li> </ol></div> <div class="mw-heading mw-heading2"><h2 id="External_links">External links</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Credit_derivative&action=edit&section=13" title="Edit section: External links"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a rel="nofollow" class="external text" href="https://www.chicagofed.org/publications/understanding-derivatives/index">Understanding Derivatives: Markets and Infrastructure</a> Federal Reserve Bank, Financial Markets Group</li> <li><a rel="nofollow" class="external text" href="https://web.archive.org/web/20090415161216/http://financialsense.com/fsu/editorials/amerman/2008/0917.html">A Credit Derivatives Risk Primer</a> - Simplified explanation for lay persons.</li> <li><a rel="nofollow" class="external text" href="https://web.archive.org/web/20070928161942/http://www.investinginbonds.com/assets/files/LehmanExoticCredDerivs.pdf">The Lehman Brothers Guide to Exotic Credit Derivatives</a></li> <li><a rel="nofollow" class="external text" href="http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf">The J.P. Morgan Guide to Credit Derivatives</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20070928161914/http://www.investinginbonds.com/assets/files/Intro_to_Credit_Derivatives.pdf">Archived</a> 2007-09-28 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a></li> <li><a rel="nofollow" class="external text" href="http://www.financial-edu.com/history-of-credit-derivatives.php">History of Credit Derivatives, Financial-edu.com</a></li> <li><a rel="nofollow" class="external text" href="https://web.archive.org/web/20070928121759/http://www.probability.net/credit.pdf">A Beginner's Guide to Credit Derivatives - Noel Vaillant, Nomura International</a></li> <li><a rel="nofollow" class="external text" href="http://www.mayerbrown.com/london/article.asp?id=3517&nid=1575">Documenting credit default swaps on asset backed securities, Edmund Parker and Jamila Piracci, Mayer Brown, Euromoney Handbooks</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20110521170516/http://www.mayerbrown.com/london/article.asp?id=3517&nid=1575">Archived</a> 2011-05-21 at the <a href="/wiki/Wayback_Machine" title="Wayback Machine">Wayback Machine</a>.</li></ul> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><style data-mw-deduplicate="TemplateStyles:r1236075235">.mw-parser-output .navbox{box-sizing:border-box;border:1px solid #a2a9b1;width:100%;clear:both;font-size:88%;text-align:center;padding:1px;margin:1em auto 0}.mw-parser-output .navbox .navbox{margin-top:0}.mw-parser-output .navbox+.navbox,.mw-parser-output .navbox+.navbox-styles+.navbox{margin-top:-1px}.mw-parser-output .navbox-inner,.mw-parser-output .navbox-subgroup{width:100%}.mw-parser-output .navbox-group,.mw-parser-output .navbox-title,.mw-parser-output .navbox-abovebelow{padding:0.25em 1em;line-height:1.5em;text-align:center}.mw-parser-output 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.hlist td ol,.mw-parser-output .navbox .hlist td ul,.mw-parser-output .navbox td.hlist dl,.mw-parser-output .navbox td.hlist ol,.mw-parser-output .navbox td.hlist ul{padding:0.125em 0}.mw-parser-output .navbox .navbar{display:block;font-size:100%}.mw-parser-output .navbox-title .navbar{float:left;text-align:left;margin-right:0.5em}body.skin--responsive .mw-parser-output .navbox-image img{max-width:none!important}@media print{body.ns-0 .mw-parser-output .navbox{display:none!important}}</style><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"></div><div role="navigation" class="navbox" aria-labelledby="Derivatives_market428" style="padding:3px"><table class="nowraplinks hlist mw-collapsible autocollapse navbox-inner" style="border-spacing:0;background:transparent;color:inherit"><tbody><tr><th scope="col" class="navbox-title" colspan="2"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Derivatives_market" title="Template:Derivatives market"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Derivatives_market" title="Template talk:Derivatives market"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Derivatives_market" title="Special:EditPage/Template:Derivatives market"><abbr title="Edit this template">e</abbr></a></li></ul></div><div id="Derivatives_market428" style="font-size:114%;margin:0 4em"><a href="/wiki/Derivatives_market" title="Derivatives market">Derivatives market</a></div></th></tr><tr><td class="navbox-abovebelow" colspan="2"><div><a href="/wiki/Derivative_(finance)" title="Derivative (finance)">Derivative (finance)</a></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Option_(finance)" title="Option (finance)">Options</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%">Terms</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Delta_neutral" title="Delta neutral">Delta neutral</a></li> <li><a href="/wiki/Exercise_(options)" title="Exercise (options)">Exercise</a></li> <li><a href="/wiki/Expiration_(options)" title="Expiration (options)">Expiration</a></li> <li><a href="/wiki/Moneyness" title="Moneyness">Moneyness</a></li> <li><a href="/wiki/Open_interest" title="Open interest">Open interest</a></li> <li><a href="/wiki/Pin_risk" title="Pin risk">Pin risk</a></li> <li><a href="/wiki/Risk-free_interest_rate" class="mw-redirect" title="Risk-free interest rate">Risk-free interest rate</a></li> <li><a href="/wiki/Strike_price" title="Strike price">Strike price</a></li> <li><a href="/wiki/Synthetic_position" title="Synthetic position">Synthetic position</a></li> <li><a href="/wiki/Greeks_(finance)" title="Greeks (finance)">the Greeks</a></li> <li><a href="/wiki/Volatility_(finance)" title="Volatility (finance)">Volatility</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Vanilla_option" class="mw-redirect" title="Vanilla option">Vanillas</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/American_option" class="mw-redirect" title="American option">American</a></li> <li><a href="/wiki/Bond_option" title="Bond option">Bond option</a></li> <li><a href="/wiki/Call_option" title="Call option">Call</a></li> <li><a href="/wiki/Employee_stock_option" title="Employee stock option">Employee stock option</a></li> <li><a href="/wiki/European_option" class="mw-redirect" title="European option">European</a></li> <li><a href="/wiki/Fixed_income" title="Fixed income">Fixed income</a></li> <li><a href="/wiki/Foreign_exchange_option" title="Foreign exchange option">FX</a></li> <li><a href="/wiki/Option_style" title="Option style">Option styles</a></li> <li><a href="/wiki/Put_option" title="Put option">Put</a></li> <li><a href="/wiki/Warrant_(finance)" title="Warrant (finance)">Warrants</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Exotic_option" title="Exotic option">Exotics</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Asian_option" title="Asian option">Asian</a></li> <li><a href="/wiki/Barrier_option" title="Barrier option">Barrier</a></li> <li><a href="/wiki/Basket_option" title="Basket option">Basket</a></li> <li><a href="/wiki/Binary_option" title="Binary option">Binary</a></li> <li><a href="/wiki/Callable_bull/bear_contract" title="Callable bull/bear contract">Callable bull/bear contract</a></li> <li><a href="/wiki/Chooser_option" title="Chooser option">Chooser</a></li> <li><a href="/wiki/Cliquet_option" title="Cliquet option">Cliquet</a></li> <li><a href="/wiki/Commodore_option" title="Commodore option">Commodore</a></li> <li><a href="/wiki/Compound_option" title="Compound option">Compound</a></li> <li><a href="/wiki/Forward_start_option" title="Forward start option">Forward start</a></li> <li><a href="/wiki/Interest_rate_option" title="Interest rate option">Interest rate</a></li> <li><a href="/wiki/Lookback_option" title="Lookback option">Lookback</a></li> <li>Mountain range</li> <li><a href="/wiki/Rainbow_option" title="Rainbow option">Rainbow</a></li> <li><a href="/wiki/Spread_option" title="Spread option">Spread</a></li> <li><a href="/wiki/Swaption" title="Swaption">Swaption</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Options_strategy" title="Options strategy">Strategies</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Backspread" title="Backspread">Backspread</a></li> <li><a href="/wiki/Box_spread_(options)" class="mw-redirect" title="Box spread (options)">Box spread</a></li> <li><a href="/wiki/Butterfly_(options)" title="Butterfly (options)">Butterfly</a></li> <li><a href="/wiki/Calendar_spread" title="Calendar spread">Calendar spread</a></li> <li><a href="/wiki/Collar_(finance)" title="Collar (finance)">Collar</a></li> <li><a href="/wiki/Condor_(options)" title="Condor (options)">Condor</a></li> <li><a href="/wiki/Covered_option" title="Covered option">Covered option</a></li> <li><a href="/wiki/Credit_spread_(options)" title="Credit spread (options)">Credit spread</a></li> <li><a href="/wiki/Debit_spread" title="Debit spread">Debit spread</a></li> <li><a href="/wiki/Diagonal_spread" title="Diagonal spread">Diagonal spread</a></li> <li><a href="/wiki/Fence_(finance)" title="Fence (finance)">Fence</a></li> <li><a href="/wiki/Intermarket_spread" title="Intermarket spread">Intermarket spread</a></li> <li><a href="/wiki/Iron_butterfly_(options_strategy)" title="Iron butterfly (options strategy)">Iron butterfly</a></li> <li><a href="/wiki/Iron_condor" title="Iron condor">Iron condor</a></li> <li><a href="/wiki/Jelly_roll_(options)" title="Jelly roll (options)">Jelly roll</a></li> <li><a href="/wiki/Ladder_(option_combination)" title="Ladder (option combination)">Ladder</a></li> <li><a href="/wiki/Naked_option" title="Naked option">Naked option</a></li> <li><a href="/wiki/Straddle" title="Straddle">Straddle</a></li> <li><a href="/wiki/Strangle_(options)" title="Strangle (options)">Strangle</a></li> <li><a href="/wiki/Protective_option" title="Protective option">Protective option</a></li> <li><a href="/wiki/Ratio_spread" title="Ratio spread">Ratio spread</a></li> <li><a href="/wiki/Risk_reversal" title="Risk reversal">Risk reversal</a></li> <li><a href="/wiki/Vertical_spread" title="Vertical spread">Vertical spread</a> (<a href="/wiki/Bear_spread" title="Bear spread">Bear</a>, <a href="/wiki/Bull_spread" title="Bull spread">Bull</a>)</li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Valuation_of_options" title="Valuation of options">Valuation</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Bachelier_model" title="Bachelier model">Bachelier</a></li> <li><a href="/wiki/Binomial_options_pricing_model" title="Binomial options pricing model">Binomial</a></li> <li><a href="/wiki/Black_model" title="Black model">Black</a></li> <li><a href="/wiki/Black%E2%80%93Scholes_model" title="Black–Scholes model">Black–Scholes</a> (<a href="/wiki/Black%E2%80%93Scholes_equation" title="Black–Scholes equation">equation</a>)</li> <li><a href="/wiki/Finite_difference_methods_for_option_pricing" title="Finite difference methods for option pricing">Finite difference</a></li> <li><a href="/wiki/Foreign_exchange_option#Valuation:_the_Garman–Kohlhagen_model" title="Foreign exchange option">Garman–Kohlhagen</a></li> <li><a href="/wiki/Heston_model" title="Heston model">Heston</a></li> <li><a href="/wiki/Lattice_model_(finance)" title="Lattice model (finance)">Lattices</a></li> <li><a href="/wiki/Margrabe%27s_formula" title="Margrabe's formula">Margrabe</a></li> <li><a href="/wiki/Put%E2%80%93call_parity" title="Put–call parity">Put–call parity</a></li> <li><a href="/wiki/Monte_Carlo_methods_for_option_pricing" title="Monte Carlo methods for option pricing">MC Simulation</a></li> <li><a href="/wiki/Real_options_valuation" title="Real options valuation">Real options</a></li> <li><a href="/wiki/Trinomial_tree" title="Trinomial tree">Trinomial</a></li> <li><a href="/wiki/Vanna%E2%80%93Volga_pricing" title="Vanna–Volga pricing">Vanna–Volga</a></li></ul> </div></td></tr></tbody></table><div></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Swap_(finance)" title="Swap (finance)">Swaps</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Amortising_swap" title="Amortising swap">Amortising</a></li> <li><a href="/wiki/Asset_swap" title="Asset swap">Asset</a></li> <li><a href="/wiki/Basis_swap" title="Basis swap">Basis</a></li> <li><a href="/wiki/Commodity_swap" title="Commodity swap">Commodity</a></li> <li><a href="/wiki/Conditional_variance_swap" title="Conditional variance swap">Conditional variance</a></li> <li><a href="/wiki/Constant_maturity_swap" title="Constant maturity swap">Constant maturity</a></li> <li><a href="/wiki/Correlation_swap" title="Correlation swap">Correlation</a></li> <li><a href="/wiki/Credit_default_swap" title="Credit default swap">Credit default</a></li> <li><a href="/wiki/Currency_swap" title="Currency swap">Currency</a></li> <li><a href="/wiki/Dividend_swap" title="Dividend swap">Dividend</a></li> <li><a href="/wiki/Equity_swap" title="Equity swap">Equity</a></li> <li><a href="/wiki/Foreign_exchange_swap" title="Foreign exchange swap">Forex</a></li> <li><a href="/wiki/Forward_rate_agreement" title="Forward rate agreement">Forward Rate Agreement</a></li> <li><a href="/wiki/Inflation_swap" title="Inflation swap">Inflation</a></li> <li><a href="/wiki/Interest_rate_swap" title="Interest rate swap">Interest rate</a></li> <li><a href="/wiki/Overnight_indexed_swap" title="Overnight indexed swap">Overnight indexed</a></li> <li><a href="/wiki/Total_return_swap" title="Total return swap">Total return</a></li> <li><a href="/wiki/Variance_swap" title="Variance swap">Variance</a></li> <li><a href="/wiki/Volatility_swap" title="Volatility swap">Volatility</a></li> <li><a href="/wiki/Year-on-year_inflation-indexed_swap" title="Year-on-year inflation-indexed swap">Year-on-year inflation-indexed</a></li> <li><a href="/wiki/Zero_coupon_swap" title="Zero coupon swap">Zero Coupon</a></li> <li><a href="/wiki/Zero-coupon_inflation_swap" title="Zero-coupon inflation swap">Zero-coupon inflation-indexed</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><div class="hlist"><ul><li><a href="/wiki/Forward_contract" title="Forward contract">Forwards</a></li><li><a href="/wiki/Futures_contract" title="Futures contract">Futures</a></li></ul></div></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Contango" title="Contango">Contango</a></li> <li><a href="/w/index.php?title=Commodities_future&action=edit&redlink=1" class="new" title="Commodities future (page does not exist)">Commodities future</a></li> <li><a href="/wiki/Currency_future" title="Currency future">Currency future</a></li> <li><a href="/wiki/Dividend_future" title="Dividend future">Dividend future</a></li> <li><a href="/wiki/Forward_market" title="Forward market">Forward market</a></li> <li><a href="/wiki/Forward_price" title="Forward price">Forward price</a></li> <li><a href="/wiki/Forward_contract#Spot–forward_parity" title="Forward contract">Forwards pricing</a></li> <li><a href="/wiki/Forward_rate" title="Forward rate">Forward rate</a></li> <li><a href="/wiki/Futures_contract#Pricing" title="Futures contract">Futures pricing</a></li> <li><a href="/wiki/Interest_rate_future" title="Interest rate future">Interest rate future</a></li> <li><a href="/wiki/Margin_(finance)" title="Margin (finance)">Margin</a></li> <li><a href="/wiki/Normal_backwardation" title="Normal backwardation">Normal backwardation</a></li> <li><a href="/wiki/Perpetual_futures" title="Perpetual futures">Perpetual futures</a></li> <li><a href="/wiki/Single-stock_futures" title="Single-stock futures">Single-stock futures</a></li> <li><a href="/wiki/Slippage_(finance)" title="Slippage (finance)">Slippage</a></li> <li><a href="/wiki/Stock_market_index_future" title="Stock market index future">Stock market index future</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Exotic_derivative" title="Exotic derivative">Exotic derivatives</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Commodity_derivative" class="mw-redirect" title="Commodity derivative">Commodity derivative</a></li> <li><a href="/wiki/Energy_derivative" title="Energy derivative">Energy derivative</a></li> <li><a href="/wiki/Freight_derivative" class="mw-redirect" title="Freight derivative">Freight derivative</a></li> <li><a href="/wiki/Inflation_derivative" title="Inflation derivative">Inflation derivative</a></li> <li><a href="/wiki/Property_derivative" title="Property derivative">Property derivative</a></li> <li><a href="/wiki/Weather_derivative" title="Weather derivative">Weather derivative</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Other derivatives</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">Collateralized debt obligation (CDO)</a></li> <li><a href="/wiki/Constant_proportion_portfolio_insurance" title="Constant proportion portfolio insurance">Constant proportion portfolio insurance</a></li> <li><a href="/wiki/Contract_for_difference" title="Contract for difference">Contract for difference</a></li> <li><a href="/wiki/Credit-linked_note" title="Credit-linked note">Credit-linked note (CLN)</a></li> <li><a href="/wiki/Credit_default_option" title="Credit default option">Credit default option</a></li> <li><a class="mw-selflink selflink">Credit derivative</a></li> <li><a href="/wiki/Equity-linked_note" title="Equity-linked note">Equity-linked note (ELN)</a></li> <li><a href="/wiki/Equity_derivative" title="Equity derivative">Equity derivative</a></li> <li><a href="/wiki/Foreign_exchange_derivative" title="Foreign exchange derivative">Foreign exchange derivative</a></li> <li><a href="/wiki/Fund_derivative" title="Fund derivative">Fund derivative</a></li> <li><a href="/wiki/Fund_of_funds" title="Fund of funds">Fund of funds</a></li> <li><a href="/wiki/Interest_rate_derivative" title="Interest rate derivative">Interest rate derivative</a></li> <li><a href="/wiki/Mortgage-backed_security" title="Mortgage-backed security">Mortgage-backed security</a></li> <li><a href="/wiki/Power_reverse_dual-currency_note" title="Power reverse dual-currency note">Power reverse dual-currency note (PRDC)</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Market issues</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Consumer_debt" title="Consumer debt">Consumer debt</a></li> <li><a href="/wiki/Corporate_bond" title="Corporate bond">Corporate debt</a></li> <li><a href="/wiki/Government_debt" title="Government debt">Government debt</a></li> <li><a href="/wiki/Great_Recession" title="Great Recession">Great Recession</a></li> <li><a href="/wiki/Municipal_debt" class="mw-redirect" title="Municipal debt">Municipal debt</a></li> <li><a href="/wiki/Tax_policy" title="Tax policy">Tax policy</a></li></ul> </div></td></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><span class="nowrap"><span class="noviewer" typeof="mw:File"><a href="/wiki/File:Emblem-money.svg" class="mw-file-description"><img alt="icon" src="//upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/16px-Emblem-money.svg.png" decoding="async" width="16" height="16" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/24px-Emblem-money.svg.png 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/32px-Emblem-money.svg.png 2x" data-file-width="48" data-file-height="48" /></a></span> </span><a href="/wiki/Portal:Business" title="Portal:Business">Business portal</a></li></ul> </div></td></tr></tbody></table></div> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236075235"></div><div role="navigation" class="navbox" aria-labelledby="Structured_finance59" style="padding:3px"><table class="nowraplinks mw-collapsible autocollapse navbox-inner" style="border-spacing:0;background:transparent;color:inherit"><tbody><tr><th scope="col" class="navbox-title" colspan="2"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Structured_finance" title="Template:Structured finance"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Structured_finance" title="Template talk:Structured finance"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Structured_finance" title="Special:EditPage/Template:Structured finance"><abbr title="Edit this template">e</abbr></a></li></ul></div><div id="Structured_finance59" style="font-size:114%;margin:0 4em"><a href="/wiki/Structured_finance" title="Structured finance">Structured finance</a></div></th></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Securitization" title="Securitization">Securitization</a></th><td class="navbox-list-with-group navbox-list navbox-odd hlist" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Securitization_transaction" class="mw-redirect" title="Securitization transaction">Securitization transaction</a></li> <li><a href="/wiki/Credit_enhancement" title="Credit enhancement">Credit enhancement</a></li> <li><a href="/wiki/Tranche" title="Tranche">Tranche</a></li> <li><a href="/wiki/Orphan_structure" title="Orphan structure">Orphan structure</a></li> <li><a href="/wiki/Shell_corporation" title="Shell corporation">Shell company</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Types of securities</th><td class="navbox-list-with-group navbox-list navbox-even hlist" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Asset-backed_security" title="Asset-backed security">Asset-backed security</a> (ABS)</li> <li><a href="/wiki/Mortgage-backed_security" title="Mortgage-backed security">Mortgage-backed security</a> (MBS)</li> <li><a class="mw-selflink selflink">Credit derivative</a></li> <li><a href="/wiki/Credit_default_swap" title="Credit default swap">Credit default swap</a> (CDS)</li> <li><a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">Collateralized debt obligation</a> (CDO)</li> <li><a href="/wiki/Collateralized_mortgage_obligation" title="Collateralized mortgage obligation">Collateralized mortgage obligation</a> (CMO)</li> <li><a href="/w/index.php?title=Collateralized_bond_obligation&action=edit&redlink=1" class="new" title="Collateralized bond obligation (page does not exist)">Collateralized bond obligation</a> (CBO)</li> <li><a href="/wiki/Collateralized_loan_obligation" title="Collateralized loan obligation">Collateralized loan obligation</a> (CLO)</li> <li><a href="/wiki/Collateralized_fund_obligation" title="Collateralized fund obligation">Collateralized fund obligation</a> (CFO)</li> <li><a href="/wiki/Senior_stretch_loan" title="Senior stretch loan">Senior stretch loan</a></li> <li><a href="/wiki/Structured_product" title="Structured product">Structured product</a></li></ul> </div></td></tr></tbody></table></div> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236075235"></div><div role="navigation" class="navbox" aria-labelledby="Bond_market189" style="padding:3px"><table class="nowraplinks hlist mw-collapsible autocollapse navbox-inner" style="border-spacing:0;background:transparent;color:inherit"><tbody><tr><th scope="col" class="navbox-title" colspan="2"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Bond_market" title="Template:Bond market"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Bond_market" title="Template talk:Bond market"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Bond_market" title="Special:EditPage/Template:Bond market"><abbr title="Edit this template">e</abbr></a></li></ul></div><div id="Bond_market189" style="font-size:114%;margin:0 4em"><a href="/wiki/Bond_market" title="Bond market">Bond market</a></div></th></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><a href="/wiki/Bond_(finance)" title="Bond (finance)">Bond</a></li> <li><a href="/wiki/Debenture" title="Debenture">Debenture</a></li> <li><a href="/wiki/Fixed_income" title="Fixed income">Fixed income</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Types of bonds by issuer</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Agency_debt" title="Agency debt">Agency bond</a></li> <li><a href="/wiki/Corporate_bond" title="Corporate bond">Corporate bond</a> <ul><li><a href="/wiki/Senior_debt" title="Senior debt">Senior debt</a></li> <li><a href="/wiki/Subordinated_debt" title="Subordinated debt">Subordinated debt</a></li></ul></li> <li><a href="/wiki/Distressed_securities" title="Distressed securities">Distressed debt</a></li> <li><a href="/wiki/Government_bond" title="Government bond">Government bond</a></li> <li><a href="/wiki/Infrastructure_bond" title="Infrastructure bond">Infrastructure bond</a></li> <li><a href="/wiki/Municipal_bond" title="Municipal bond">Municipal bond</a></li> <li><a href="/wiki/Global_bond" title="Global bond">Global bond</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Types of bonds by payout</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Accrual_bond" title="Accrual bond">Accrual bond</a></li> <li><a href="/wiki/Auction_rate_security" title="Auction rate security">Auction rate security</a></li> <li><a href="/wiki/Commercial_paper" title="Commercial paper">Commercial paper</a></li> <li><a href="/wiki/Consol_(bond)" title="Consol (bond)">Consol</a></li> <li><a href="/wiki/Convertible_bond" title="Convertible bond">Convertible bond</a> <ul><li><a href="/wiki/Contingent_convertible_bond" title="Contingent convertible bond">Contingent</a></li> <li><a href="/wiki/Reverse_convertible_securities" title="Reverse convertible securities">Reverse</a></li></ul></li> <li><a href="/wiki/Exchangeable_bond" title="Exchangeable bond">Exchangeable bond</a></li> <li><a href="/wiki/Extendible_bond" title="Extendible bond">Extendible bond</a></li> <li><a href="/wiki/Fixed_rate_bond" class="mw-redirect" title="Fixed rate bond">Fixed rate bond</a></li> <li><a href="/wiki/Floating_rate_note" title="Floating rate note">Floating rate note</a> <ul><li><a href="/wiki/Inverse_floating_rate_note" title="Inverse floating rate note">Inverse</a></li> <li><a href="/wiki/Inflation-indexed_bond" title="Inflation-indexed bond">Inflation-indexed</a></li></ul></li> <li><a href="/wiki/High-yield_debt" title="High-yield debt">High-yield debt</a></li> <li><a href="/wiki/Lottery_bond" title="Lottery bond">Lottery bond</a></li> <li><a href="/wiki/Perpetual_bond" title="Perpetual bond">Perpetual bond</a></li> <li><a href="/wiki/Zero-coupon_bond" title="Zero-coupon bond">Zero-coupon bond</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Bond_option" title="Bond option">Bond options</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Callable_bond" title="Callable bond">Callable bond</a></li> <li><a href="/wiki/Convertible_bond" title="Convertible bond">Convertible bond</a></li> <li><a href="/wiki/Embedded_option" title="Embedded option">Embedded option</a></li> <li><a href="/wiki/Exchangeable_bond" title="Exchangeable bond">Exchangeable bond</a></li> <li><a href="/wiki/Extendible_bond" title="Extendible bond">Extendible bond</a></li> <li><a href="/wiki/Puttable_bond" title="Puttable bond">Puttable bond</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Bond_valuation" title="Bond valuation">Bond valuation</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Clean_price" title="Clean price">Clean price</a></li> <li><a href="/wiki/Bond_convexity" title="Bond convexity">Convexity</a></li> <li><a href="/wiki/Coupon_(finance)" title="Coupon (finance)">Coupon</a></li> <li><a href="/wiki/Yield_spread" title="Yield spread">Credit spread</a></li> <li><a href="/wiki/Current_yield" title="Current yield">Current yield</a></li> <li><a href="/wiki/Dirty_price" title="Dirty price">Dirty price</a></li> <li><a href="/wiki/Bond_duration" class="mw-redirect" title="Bond duration">Duration</a></li> <li><a href="/wiki/I-spread" title="I-spread">I-spread</a></li> <li><a href="/wiki/Mortgage_yield" title="Mortgage yield">Mortgage yield</a></li> <li><a href="/wiki/Nominal_yield" title="Nominal yield">Nominal yield</a></li> <li><a href="/wiki/Option-adjusted_spread" title="Option-adjusted spread">Option-adjusted spread</a></li> <li><a href="/wiki/Risk-free_bond" title="Risk-free bond">Risk-free bond</a></li> <li><a href="/wiki/Weighted-average_life" title="Weighted-average life">Weighted-average life</a></li> <li><a href="/wiki/Yield_curve" title="Yield curve">Yield curve</a></li> <li><a href="/wiki/Yield_spread" title="Yield spread">Yield spread</a></li> <li><a href="/wiki/Yield_to_maturity" title="Yield to maturity">Yield to maturity</a></li> <li><a href="/wiki/Z-spread" title="Z-spread">Z-spread</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Securitized products</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Asset-backed_security" title="Asset-backed security">Asset-backed security</a></li> <li><a href="/wiki/Collateralized_debt_obligation" title="Collateralized debt obligation">Collateralized debt obligation</a></li> <li><a href="/wiki/Collateralized_mortgage_obligation" title="Collateralized mortgage obligation">Collateralized mortgage obligation</a></li> <li><a href="/wiki/Commercial_mortgage-backed_security" title="Commercial mortgage-backed security">Commercial mortgage-backed security</a></li> <li><a href="/wiki/Mortgage-backed_security" title="Mortgage-backed security">Mortgage-backed security</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Institutions</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Commercial_Mortgage_Securities_Association" title="Commercial Mortgage Securities Association">Commercial Mortgage Securities Association</a> (CMSA)</li> <li><a href="/wiki/International_Capital_Market_Association" title="International Capital Market Association">International Capital Market Association</a> (ICMA)</li> <li><a href="/wiki/Securities_Industry_and_Financial_Markets_Association" title="Securities Industry and Financial Markets Association">Securities Industry and Financial Markets Association</a> (SIFMA)</li></ul> </div></td></tr></tbody></table></div> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236075235"></div><div role="navigation" class="navbox" aria-labelledby="Financial_risk_and_financial_risk_management192" style="padding:3px"><table class="nowraplinks hlist mw-collapsible autocollapse navbox-inner" style="border-spacing:0;background:transparent;color:inherit"><tbody><tr><th scope="col" class="navbox-title" colspan="2"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Financial_risk" title="Template:Financial risk"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Financial_risk" title="Template talk:Financial risk"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Financial_risk" title="Special:EditPage/Template:Financial risk"><abbr title="Edit this template">e</abbr></a></li></ul></div><div id="Financial_risk_and_financial_risk_management192" style="font-size:114%;margin:0 4em"><a href="/wiki/Financial_risk" title="Financial risk">Financial risk</a> and <a href="/wiki/Financial_risk_management" title="Financial risk management">financial risk management</a></div></th></tr><tr><th scope="row" class="navbox-group" style="width:1%">Categories</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Consumer_credit_risk" title="Consumer credit risk">Consumer credit risk</a></li> <li><a href="/wiki/Sovereign_credit_risk" title="Sovereign credit risk">Sovereign credit risk</a></li> <li><a href="/wiki/Settlement_risk" title="Settlement risk">Settlement risk</a></li> <li><a href="/wiki/Default_(finance)" title="Default (finance)">Default risk</a></li> <li><a href="/wiki/Concentration_risk" title="Concentration risk">Concentration risk</a></li> <li><a class="mw-selflink selflink">Credit derivative</a></li> <li><a href="/wiki/Securitization" title="Securitization">Securitization</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Market_risk" title="Market risk">Market risk</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Commodity_risk" title="Commodity risk">Commodity risk</a> (e.g. <a href="/wiki/Volume_risk" title="Volume risk">Volume risk</a>, <a href="/wiki/Basis_risk" title="Basis risk">Basis risk</a>, <a href="/wiki/Shape_risk" title="Shape risk">Shape risk</a>, <a href="/wiki/Holding_period_risk" title="Holding period risk">Holding period risk</a>, <a href="/wiki/Price_area_risk" class="mw-redirect" title="Price area risk">Price area risk</a>)</li> <li><a href="/wiki/Equity_risk" title="Equity risk">Equity risk</a></li> <li><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a></li> <li><a href="/wiki/Foreign_exchange_risk" title="Foreign exchange risk">FX risk</a></li> <li><a href="/wiki/Margining_risk" title="Margining risk">Margining risk</a></li> <li><a href="/wiki/Interest_rate_risk" title="Interest rate risk">Interest rate risk</a></li> <li><a href="/wiki/Inflation_risk" class="mw-redirect" title="Inflation risk">Inflation risk</a></li> <li><a href="/wiki/Volatility_risk" title="Volatility risk">Volatility risk</a></li> <li><a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a> (e.g. <a href="/wiki/Refinancing_risk" title="Refinancing risk">Refinancing risk</a>, <a href="/wiki/Deposit_risk" title="Deposit risk">Deposit risk</a>)</li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Operational_risk_management" title="Operational risk management">Operational risk management</a></li> <li><a href="/wiki/Business_risk" class="mw-redirect" title="Business risk">Business risk</a></li> <li><a href="/wiki/Model_risk" title="Model risk">Model risk</a></li> <li><a href="/wiki/Reputational_risk" class="mw-redirect" title="Reputational risk">Reputational risk</a></li> <li><a href="/wiki/Country_risk" title="Country risk">Country risk</a></li> <li><a href="/wiki/Political_risk" title="Political risk">Political risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Other</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Execution_risk" class="mw-redirect" title="Execution risk">Execution risk</a></li> <li><a href="/wiki/Profit_risk" title="Profit risk">Profit risk</a></li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a></li> <li><a href="/wiki/Non-financial_risk" title="Non-financial risk">Non-financial risk</a></li></ul> </div></td></tr></tbody></table><div></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Financial_risk_modeling" title="Financial risk modeling">Modeling</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Arbitrage_pricing_theory" title="Arbitrage pricing theory">Arbitrage pricing theory</a></li> <li><a href="/wiki/Black%E2%80%93Scholes_model" title="Black–Scholes model">Black–Scholes model</a></li> <li><a href="/wiki/Replicating_portfolio" title="Replicating portfolio">Replicating portfolio</a></li> <li><a href="/wiki/Cashflow_matching" title="Cashflow matching">Cash flow matching</a></li> <li><a href="/wiki/Expected_shortfall" title="Expected shortfall">Conditional Value-at-Risk (CVaR)</a></li> <li><a href="/wiki/Copula_(probability_theory)" class="mw-redirect" title="Copula (probability theory)">Copula</a></li> <li><a href="/wiki/Drawdown_(economics)" title="Drawdown (economics)">Drawdown</a></li> <li><a href="/wiki/First-hitting-time_model" title="First-hitting-time model">First-hitting-time model</a></li> <li><a href="/wiki/Immunization_(finance)" title="Immunization (finance)">Interest rate immunization</a></li> <li><a href="/wiki/Market_portfolio" title="Market portfolio">Market portfolio</a></li> <li><a href="/wiki/Modern_portfolio_theory" title="Modern portfolio theory">Modern portfolio theory</a></li> <li><a href="/wiki/Omega_ratio" title="Omega ratio">Omega ratio</a></li> <li><a href="/wiki/Risk-adjusted_return_on_capital" title="Risk-adjusted return on capital">RAROC</a></li> <li><a href="/wiki/Risk-free_interest_rate" class="mw-redirect" title="Risk-free interest rate">Risk-free rate</a></li> <li><a href="/wiki/Risk_parity" title="Risk parity">Risk parity</a></li> <li><a href="/wiki/Sharpe_ratio" title="Sharpe ratio">Sharpe ratio</a></li> <li><a href="/wiki/Sortino_ratio" title="Sortino ratio">Sortino ratio</a></li> <li><a href="/wiki/Survival_analysis" title="Survival analysis">Survival analysis</a> (<a href="/wiki/Proportional_hazards_model" title="Proportional hazards model">Proportional hazards model</a>)</li> <li><a href="/wiki/Tracking_error" title="Tracking error">Tracking error</a></li> <li><a href="/wiki/Value_at_risk" title="Value at risk">Value-at-Risk (VaR)</a> and extensions (<a href="/wiki/Profit_at_risk" title="Profit at risk">Profit at risk</a>, <a href="/wiki/Margin_at_risk" title="Margin at risk">Margin at risk</a>, <a href="/wiki/Liquidity_at_risk" title="Liquidity at risk">Liquidity at risk</a>, <a href="/wiki/Cash_flow_at_risk" class="mw-redirect" title="Cash flow at risk">Cash flow at risk</a>, <a href="/wiki/Earnings_at_risk" title="Earnings at risk">Earnings at risk</a>)</li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Basic concepts</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Asset_allocation" title="Asset allocation">Asset allocation</a></li> <li><a href="/wiki/Asset_and_liability_management" title="Asset and liability management">Asset and liability management</a></li> <li><a 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