Finance and Economics Discussion Series (FEDS)
December 2001
Understanding Credit Derivatives and their Potential to Synthesize Riskless Assets
Antulio N. Bomfim
Abstract:
The credit derivatives market is emerging as a potentially important new development that may help shape the overall financial markets in the years to come. In this paper, I provide a brief overview of the credit derivatives market and assess its future potential in the creation of private-sector instruments that are virtually free of default risk, and, thus, may be appealing to investors who currently favor the safety of U.S. Treasury securities.
Keywords: Credit default swaps, risk, asset swaps, financial engineering, synthetic CDOs
PDF: Full Paper
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