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Credit Derivatives: Systemic Risks and Policy Options?
Author:
Mr. John Kiff
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https://orcid.org/0000-0002-0473-0831
,
Ms. Jennifer A. Elliott
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https://orcid.org/0000-0002-7115-6585
,
Mr. Elias G. Kazarian
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,
Ms. Jodi G Scarlata
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https://orcid.org/0000-0002-7275-8430
, and
Carolyne Spackman
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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 254
Language:
English
Publication Date:
01 Nov 2009
DOI:
https://doi.org/10.5089/9781451874006.001
ISBN:
9781451874006
ISSN:
1018-5941
Pages:
35
Keywords:
WP; counterparty risk; market participant; OTC derivative market; basis point; credit derivative market; market abuse; protection seller
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase systemic risk; and (ii) should they be regulated more closely, and if so, how and to what extent? The paper begins with a basic description of credit derivative markets and recent events, followed by an assessment of their recent association with systemic risk. It then reviews and evaluates some of the authorities' proposed initiatives, and discusses some alternative directions that could be taken.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund