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Recent Developments in Credit Markets |
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| Authors: | Bernd Brommundt Jochen Felsenheimer Philip Gisdakis Michael Zaiser |
| Affiliation: | (1) Swiss Institute of Banking and Finance, University of St. Gallen, Rosenbergstrasse 52, 9000 St. Gallen, Switzerland;(2) HVB Corporates & Markets, Arabellastrasse 12, 81925 Munich, Germany |
| Abstract: | We summarize recent developments in the credit derivative markets. We show the role of dependence between individual debtors in portfolio derivatives in a study of implied correlation. The risk of changing dependence structures between stock and bond markets becomes evident in an example of capital structure arbitrage. How credit derivatives can introduce new risks is illustrated by the example of “overlay” in basket derivatives. |
| Keywords: | Credit risk Correlation risk Capital structure arbitrage Credit derivative risk |
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