Credit Default Swaps and Indian Corporate Bond Market

Abstract

Credit swap is a derivative security that can be considered as a default insurance on loans or bonds. A gradual relief in the corporate bond regulations could lead to a steady growth of the Indian corporate bond market. Globally, CDS is used as a vital risk measurement tool, besides the most actively traded form of credit derivative. It is defined as the CDS spread minus the spread of the underlying bond over the risk free rate or the excess of the CDS spread over the bond yield spread.