StrikeAndYield crib sheet · information and education only
Credit Derivatives
Instruments that isolate and transfer default risk — insurance-like payoffs on whether a borrower survives.
The shelf — 9 instruments
Medium 3
| Credit Default Swap | Insurance on a borrower's default — and the market's sharpest real-time gauge of credit fear. |
| Factoring & Receivables Finance | Selling the money your customers owe you, today, at a discount. Financing that follows the invoice rather than the balance sheet — which is why weak companies can use it and why it hides so well. |
| Leveraged Loan | The senior, secured, floating-rate sibling of the junk bond — and the raw material every CLO is built from. |
Hard 6
| Asset Swap | A bond with its interest-rate risk surgically removed, leaving pure credit. The package that turns any bond into a floating-rate note and defines the spread the market quotes. |
| CDO & Synthetic Tranches | Slicing a pool of credit risk into layers of first-loss and last-loss — the machine that concentrated 2008, and the tranche market that outlived it. |
| CDS Index | Default protection on 100+ names in one trade — the S&P 500 of credit risk. |
| CDS Option | An option on the price of credit protection — the instrument that lets you be long the fear of a default without paying for it every day. |
| CLO | Leveraged corporate loans, tranched into everything from AAA paper to private-equity-style equity. |
| Credit-Linked Note | A bond with a CDS hidden inside: earn an enhanced coupon for carrying someone else's default risk. |
What moves prices here
- The default cycle — Spreads lead defaults, and both cluster
- Rating boundaries — A downgrade across the investment-grade line forces selling
- Liquidity of the instrument — The index trades when the single names do not
- Recovery assumptions — The same default is not the same loss
- Basis between bond and derivative — The same credit priced two ways
- Correlation, in anything tranched — It decides which slice takes the loss
The calendar
| Twice a year | Index roll |
| Quarterly | Coupon and reset dates |
| Quarterly | Company reporting |
| On the event | Credit-event determinations |
| Annually | Rating agency reviews |
Which risk decides, across the shelf
| Failure mode |
Decides | Share |
| Market | 3 of 9 | 33% |
| Credit | 8 of 9 | 89% |
| Liquidity | 3 of 9 | 33% |
| Funding | 0 of 9 | 0% |
| Operational | 2 of 9 | 22% |
Counted from the same table each product page prints. Not a
rating and not a ranking: there is deliberately no total.
Information and education only. Every page, figure and
calculator on this site exists to explain how financial instruments work. Nothing here is
investment, tax or legal advice, a recommendation, or a valuation you can rely on.
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