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Derivatives

  Derivatives   |   Terms
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  • February 9, 2023
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Credit Portfolio Derivative

A credit derivative in which the underlying is a portfolio of credit names (credit portfolios). This type of derivatives is instrumental in trading the credit risk associated with a portfolio of credit products amongst market participants, each for its own purpose (risk management requirements, hedging, market making, etc.)

Examples of credit portfolio derivatives include dynamic portfolio swaps, basket default swaps, nth-to-default basket swaps, index credit default swaps (index CDS), single-tranche collateralized debt obligations (single tranche CDOs), forward-starting STCDOs, tranche options, and index tranches.


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