credit derivative


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Related to credit derivative: Credit default swap

credit derivative

n.
A financial derivative used to transfer the risk of investing in bonds, loans, or other debt.
References in periodicals archive ?
One last type of credit derivative is the credit spread option, which gives the buyer the right but not the obligation to pay or receive a specified credit spread for a given period.
New credit derivative instruments appear to be useful to underwriters who want to hedge the risk of a residential mortgage loan warehouse.
The second is whether macroeconomic factors might act as catalysts in initiating widespread credit crises and their associated implications for credit derivative markets.
Credit derivatives illustrate the limitations of balance sheet measurement of derivative liabilities.
Compared with the lightly regulated and speculative international markets, one of China's problems remains the lack of credit derivative products, said Gao Zhanjun, a senior trader at Beijing-based Citic Securities.
Credit derivatives are financial contracts whose value is derived primarily from an underlying asset or market quote that incorporates credit risk.
The worst nightmare of the regulatory community today is not the visible threat looming on the horizon, but rather the eerily tranquil scene in the marketplace for everything from loans to credit derivative swaps.
Consider a credit derivative that hedges credit risk of a loan, for example.
Credit events: Contrary to an insurance policy, the settlement of a credit derivative is not triggered by an actual loss incurred by the protection buyer but by the occurrence of credit events previously agreed upon.
For assets held in banking books, regulatory capital relief is less generous, limited to instances when the credit derivative gives a one-to-one match with the loss experience of individual banking-book positions.
Financial market regulators, alert to the risk of a new Barings, are looking closely at the area of credit derivatives and the Bank of England is to issue guidance "in the near future," a spokeswoman said.
The Determinations Committees (DCs) were formally established approximately three years ago in March 2009 with the publication of the DC Rules and the March 2009 Supplement to the Credit Derivatives Definitions and the Big Bang Protocol.