Rising concern over defaults and business bankruptcies in the 1980s and 1990s led to new techniques called credit derivatives that provide at least some positive rate of return to the beneficiaries of each contract.

Question

Quizplus · Accepted Answer

Credit derivatives emerged in response to the increasing concern over defaults and business bankruptcies during the 1980s and 1990s. They were designed to transfer the credit risk of fixed income products between parties, allowing the beneficiaries to hedge against losses and potentially secure a positive rate of return, even in adverse conditions.

Rising Concern Over Defaults and Business Bankruptcies in the 1980s