Cracking correlation

Single-name credit default swaps have a subtle form of default risk correlation. How are brokers, dealers and end-users handling it?

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Market participants are coming to realise that they should pay more attention to default correlation risk embedded in all single-name credit default swaps (CDSs). Mark Ritter, Stamford, Connecticut-based global head of credit exposure management at UBS Warburg, says: “It’s not that the problem was completely ignored, but rather that it has become more of a point of focus over the past year or so.”

So while issues related to contract specification, such as restructuring and successor-related

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