History and Participants
The market in credit derivatives started from nothing in 1993. By 1996 there was around $40 billion of outstanding transactions, half of which involved the debts of developing countries.
Credit default products are the most commonly traded credit derivative product and include unfunded products such as credit default swaps and funded products such as collateralized debt obligations (see further discussion below).
On May 15, 2007, in a speech concerning credit derivatives and liquidity risk, Geithner stated: “Financial innovation has improved the capacity to measure and manage risk.”
The ISDA reported in April 2007 that total notional amount on outstanding credit derivatives was $35.1 trillion with a gross market value of $948 billion (ISDA's Website). As reported in The Times on September 15, 2008, the "Worldwide credit derivatives market is valued at $62 trillion".
Although the credit derivatives market is a global one, London has a market share of about 40%, with the rest of Europe having about 10%.
The main market participants are banks, hedge funds, insurance companies, pension funds, and other corporates.
Read more about this topic: Credit Derivative
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