The British Bankers’ Association’s Credit Derivatives Report 2005/06 was unveiled at the BBA’s third annual credit derivative conference held in London on September 21. In 2004 the BBA survey predicted that the global credit derivative market in 2006 would be $8.2 trillion but it is actually $20.2 trillion.
Claude Brown, partner at Clifford Chance, who drew up the documentation on some of the very first credit derivatives in 1991, was first to address the conference. He pointed out that a modest prediction of prospects for credit derivatives is not a new thing.
“We at Clifford Chance invested a lot of resources and money in trying to develop credit derivatives and back in 1995 it didn’t seem likely that the market was going to take off,” he said.
Participants
Hedge funds are driving much of the market’s growth and account for 28% of the market, up from 16% in 2004. Banks still provide the mainstay in terms of market participants. For the first time, the survey split their activities into trading and loan portfolio management – these are some 39% and 18% of the market respectively.
| Explosive growth |
| Global credit derivatives market |
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| Source: BBA |
Single-name CDS activity remains the most important part of the market, with some 32.9%