This section of our website includes a growing database of resources on the structured credit and credit derivatives market that are free to registered users of our website, including our Glossary of commonly used terms and our Essentials guide to credit derivatives and structured credit.
See also our jobs pages and our news digest of company announcements, bank research and articles in the generalist press.
Rapid evolution
The credit derivatives and CDO markets have grown rapidly in recent years to become an essential part of the global financial markets. The market continues to grow rapidly and the whole business of buying and managing credit risk is evolving at a frenetic pace.
The key drivers of this rapid evolution are:
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investor demand for new sources of yield and absolute return;
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regulatory pressure on banks to manage their credit exposures more effectively;
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and product innovation by market participants.
Creditflux has been providing essential information on these markets since 2001 and we have built up an archive of more than 5,000 news and other articles available exclusively to subscribers, as well as data on CDOs and other deals which is available to subscribers to our Data+ service.
Key facts on structured credit and credit derivatives
The volume of outstanding credit derivatives has grown from less than $1 trillion in 2001 to $26 trillion in 2006 according to Isda. See table below.
| $bn | |
| Dec-01 | 919 |
| Dec-02 | 2,150 |
| Dec-03 | 3,580 |
| Dec-04 | 8,420 |
| Dec-05 | 17,300 |
| Jun-06 | 26,000 |
| source: Isda | |
The volume of outstanding cash CDOs stands at $986 billion at the start of 2007, according to Creditflux Data+
The volume of synthetic CDO tranches traded in the past three years is $739 billion, according to Creditflux Data+
The most important users of credit derivatives have historically been banks (see chart below). But anecdotal evidence suggests that hedge funds, insurance companies, mutual funds, pension funds and other buy-side firms are the fastest growing sectors of the market.
The largest category of cash CDOs are those backed by asset-backed securities (CDOs of ABS), closely followed by those collateralised by leveraged loans (collateralised loan obligations or CLOs).
| $bn | % | |
| structured finance | 492 | 50 |
| corporate | 412 | 42 |
| trups | 26 | 3 |
| other | 56 | 6 |
| Total | 986 | 100 |
| source: Creditflux Data+ | ||
The most liquid credit derivative products are credit indices. The main indices are the investment grade indices iTraxx Europe and CDX NA IG, the CDX NA HY North American high yield index, and the North American and European Xover and HiVol indices.
Credit derivatives are over-the-counter contracts almost always documented using standard templates and definitions drawn up by the International Swaps and Derivatives Association (Isda).
One of the fastest growing areas of credit derivatives is the market for credit index tranches. Volumes of this ‘correlation trading’ business are expected to have surpassed $5 trillion in 2006 according to Creditflux Data+.
The impact of the subprime crisis: download this spreadsheet showing Creditflux's calculations of crisis-related write-downs at 1 April 2008
Supplements
Supplements published by Creditflux and other industry resources. This information is free to registered users of the website
Primers
Glossary - Look up terms in our Structured credit and credit derivatives glossary
Essentials - Get to grips with the basics using our primer on Credit derivative and structured essentials
Inside Guide
Credit Derivative Product Companies
June 2008
Roundtables
CPPI technology in credit
March 2007
Special Reports