Study On Applied Credit Derivatives

Credit derivatives, arising in 1990s, are financial instruments designed for managing or shifting credit risks. Those products make it more effective for commercial banks to manage credit risks and hence the change of traditional characteristics of commercial banks' credit risk management.This article analyses first credit derivatives' market scales, second their categories, backgrounds and characteristics; third the varied risks involved, fourth their utility in shifting credit risks of bank loans by commercial banks. Then this article describes the assets portfolios method of credit risk management.In the first chapter, the author analyzes the scale of credit derivative products in the world and the present situation of researches at home and abroad.In the second chapter, in light of the background, the author describes categories, major functions and characteristics of credit derivative products.In the third chapter, the author analyzes the inward risks involved with credit derivative products and the management of such risks.The author focuses on the comparison of credit derivative products with bank loans. The fourth chapter not only describes credit derivative products' function in shifting credit risks of bank loan, but also analyzes the change of assets earning since these products are used.Afterwards, the fifth chapter describes the theory of asset portfolios method of credit risk management. The author emphasizes on the application of credit derivatives in banking asset management—how to prevent convergence of credit risks of bank loans while maintaining banking business.This article discusses the application of credit derivatives in commercial banks in China after a thorough study of practices in China and the latest researches overseas. The author hopes to provide references in credit derivative products' application, risk management and their positioning in commercial banks as well.