Credit derivatives: the next generation

Now that credit default swaps and other credit derivatives are moving into the mainstream of financial trading, a new range of products and structures are being developed using synthetic techniques. Calyon's Loic Fery and Ally Chow review some of these innovations

Credit default swaps (CDS) have been until quite recently regarded as exotic derivative instruments traded by individuals with thick glasses and big brains who are otherwise known as the 'F9 monkeys'. CDS instruments can now be regarded as flow products and whilst the topic is not as popular as property prices at dinner parties, judging by the frequency of credit derivatives (in any shape or form) being discussed or reported in the newspapers or magazines, the credit derivatives market has