Credit risk

Credit derivatives continue to reach a wider audience. Perhaps most notable this year has been their use, still on a limited basis, by corporate treasuries. In 2004, credit derivatives bankers were sceptical that corporates would take up their products, and reported that any credit-related deals were a lot of work and in many cases did not come to fruition.

Now corporates have changed their tune. This summer, Casino, the French grocer, pioneered credit spread warrants with Dresdner Kleinwort Wasserstein. Now a handful of bankers report that their corporate clients are beginning to use credit derivatives to hedge against spread widening on future issues. Most agree this kind of use is on a small scale, but expect this section of the market to develop further in 2005.

Corporates that have spent the past few years cleaning up their balance sheets and