illustrate the limitations of balance sheet measurement of derivative liabilities.
AIGFP enters into credit derivative
transactions in the ordinary
Launched in November 2008, Fitch's liquidity scores cover the most widely traded credit derivative
assets, helping market participants identify their exposure to the most liquid and least liquid assets, and strengthen their liquidity risk management procedures.
The equity derivatives market, although dwarfed by those for interest rate and credit derivatives
, is large and growing and that itself may be problematic.
"The computationally challenging analysis of credit factors such as spread, credit rating, foreign exchange and interest rates for a wide variety of corporate investments have made the credit derivative
market a black art at best," said Ilya Mirman, vice president of marketing at Interactive Supercomputing.
If the hedged asset were measured at fair value, the changes in values of the hedged item and the credit derivative
may offset each other, reducing the volatility that arises when only the derivative is marked to market and not the hedged item.
Well, the most basic kind of credit derivative
is an interest rate swap.
Through a credit derivative
, the bank can "sell" a fixed amount of exposure without having to structure, document, and negotiate separate agreements for each type of instrument.
The variety of credit derivative
contract forms can obscure the common role of these contracts as mechanisms to transfer credit risk between counterparties and the returns for bearing this category of risk.
China will have its first creditdefault swap (CDS) products before the end of 2010, as regulators carefully review the credit derivative
A credit derivative
is an agreement designed explicitly to shift credit risk between the parties; its value is derived from the credit performance of one or more corporations, sovereign entities, or debt obligations.
Many CDO deals come with credit derivative
enhancements and ratings from the major agencies of the overall risk of the deal.