Unlike Isda’s survey, the BIS figures give a breakdown of the market by type of instrument. At the end of 2005, just under 73% of outstandings were for single-name contracts, with multi-name instruments (that is, baskets, index tranches and synthetic CDOs) accounting for the remainder.
As this survey shows, synthetic CDOs (see page 40) are only a small part of the market in terms of volumes, but they are a big force driving the growth of the market. Dealers issue these investment vehicles to investors including banks, pension funds, insurers and individuals, and then hedge themselves by trading other credit derivatives such as single name credit default swaps, credit indices and index tranches, so increasing the amount of activity in all credit derivatives.
Cashflow CDOs (see page 39) are not usually thought of as credit derivatives, but they are certainly structured credit products. And they play a similar role to synthetic CDOs of channelling investments into the broad credit market.
According to figures compiled by Creditflux, there was a total of $469 billion of cashflow CDOs outstanding at the end of 2005, with $194 billion of new deals issued in 2005 alone.