Protected from the credit glare?

Are developments in the credit default swap and collateralised debt obligation markets consistent with the risk transfer that dealers say is the benefit of credit derivatives? Jill Wong asks two experts for their views

The lack of supply of underlying credits and diminishing credit spreads has led to increasing leverage being used to boost returns, resulting in products such as collateralised debt obligations (CDOs) of CDOs being marketed to investors. Is this consistent with the credit risk transfer that is the basic premise of credit derivatives?

Brian Ranson, managing director, credit strategies group, Moody's KMV: One could argue that the growth of the credit default swap (CDS) market and the increase in