A Research On The Credit Risk Of The Credit Derivatives

The credit derivatives are the effective instruments to handle the credit paradox. They are financial techniques which are used to diverse, transfer and decrease the credit risk from the underlying loans as to create a new mechanism for trading credit risk in non-traditional formats within defined risk/reward parameters.Although credit derivatives were not introduced until 1992, their markets are almost the fastest developing market. These derivatives have a lot of advantages, but they also bring some new uncertainty and risks. The new important question is how to control these new products and ensure that they are used only in appropriate circumstances.The article focuses on the research of the analyses, measurement and control of the risk of the credit derivatives. First, the article mainly introduces the structure, emergence and development of the credit derivatives and the huge effects to financial markets. In part three, the article explores the credit risk of the credit derivatives to the protection buyer and seller and other risk, such as operational risk, liquidity risk. In the part four, the article discusses how to use the EDF model to predict the united frequency of these new products. At last, the article introduces the problem that should be considered in choosing the good trader.