Credit Derivatives: Buying and Selling Credit
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Credit Derivatives: Buying and Selling Credit

Intuition Publishing
Updated Sep 24, 2020

Fixed rate bond investors have always taken on some credit risk through the credit spread. However, until the 1980s, credit exposure was very limited and default was rare. In more recent decades, the risk of default increased with the growth of the high yield market. Here we examine high yield bonds, isolating credit, and fair compensation for credit.