RECENT DEVELOPMENTS IN CREDIT
DERIVATIVE AND STRUCTURED
CREDIT MARKETS
Hung Q. Tran
International Monetary Fund
Global Credit Derivatives Outstanding1
(In trillions of U.S. dollars)
Credit
derivatives
0
5
10
15
20
25
30
1997
1999
2001
2003
2005
Sources: BBA, BIS, ISDA, and Risk Magazine.
1
Credit derivatives, as reported here, are comprised of credit defaut swaps, credit-linked notes, and portfolio swaps.
2
Data for 2006 are only available through the first half.
Corporate bonds and loans2
0
20
40
60
80
100
120
140
160
180
12345678910111213141516171819
Growing Pains? Credit Derivative Market versus Interest Rate Swap Market Growth
(In trillions of U.S. dollars, amount outstanding)
Years from market inception
2
Sources: BIS; and ISDA.
1
Credit derivatives, as reported here, are comprised of credit default swaps, credit-linked notes, and portfolio swaps.
2
Credit derivatives data start from 1997, while interest rate swaps start from 1987.
Interest rate swaps
Credit derivatives1
Source: July 2006 Bank of England Financial Stability Report
Price of Delphi 6.55 Percent Bonds due June 15, 2006
(October-November 2005 as a percent of par)
50
55
60
65
70
75
10/7
10/13
10/19
10/25
10/31
11/4
11/10
11/17
Source: Bloomberg
Bankruptcy
filing
Settlement auction
(63.375)
Physical
settlement
Potential Credit Cycle Dynamics
A
B
C
Typical credit
c
ycle
Smoother credit cycle
Time
Cr
e
di
t
A
g
gr
e
gates
US CDS spreads are diverging from bond spreads
?
US Corporates
RECENT DEVELOPMENTS IN CREDIT
DERIVATIVE AND STRUCTURED
CREDIT MARKETS
Hung Q. Tran
International Monetary Fund
download RECENT DEVELOPMENTS IN CREDIT DERIVATIVE AND STRUCTURED CREDIT MARKETS
