Credit derivatives are financial products that provide protection from credit risks for companies, financial institutions and corporate investors by creating derivative tools that suit their needs. Credit derivatives are of the frequently referenced risk management tools that allows you to transfer the exposed credit risks of the securities to another party without the need to change the ownership of the assets. The most commonly used tool for the credit derivatives is the Credit Default Swaps(CDS). CDS is basically an insurance process against credit risk. In this study, the mechanism, types and uses of credit default swaps is explained in terms of conceptual aspects.The study also examines sovereign CDS premiums for five of the devoloping countries,which are Turkey, Argentina, South Korea, Indonesia and Russia, for the period between 2008 and 2012.
Credit Derivatives, Credit Default Swaps, Credit Risk