Credit Default Swaps and Other Credit Derivatives:

Structure and Uses With an unparalleled history of development, credit swaps encompass a very wide range of financial instruments, serving the needs of an equally diverse set of users. While originally conceived as instruments for hedging against the possibility of default of a borrower, or partial recovery of lend funds in case of a default, credit swaps now encompass instruments that help enhance the credibility and portfolio profile of a wide range of users.

In this weeks Discussion, you will compare the various types of credit derivatives, focusing on the uses and benefits of credit default swaps.

To Prepare: Review this weeks Learning Resources, as well as other resources you may access from the Internet. Consider the following: How could a bank use credit derivatives in order to optimize its portfolio of assets? What types of asset classes are most probably associated with credit derivatives?

Post 3- to 6-paragraph discussion of the users and benefits of credit derivatives. Make sure to include the following in your analysis:

Question #1 What are some of the credit derivatives most commonly used by large non-financial corporations?

Question #2 In what ways do credit derivatives help distribute risk throughout a wide range of investors and business entities?

Question #3 Are credit default swaps evaluated or rated by any organization? Are there benefits to such a rating?

Clearly address each of the questions with 12 paragraphs. Make sure you use APA style for your response(s) and properly cite any resources you have used.