Credit Default Swaps (cds) And Their Impact On Financial Stability

One of the most important financial developments in the recent decades is credit derivatives, as they revolutionized risk management trends. The market of Credit Default Swaps (CDS), the main type of credit derivatives, has experienced an explosive growth in the past. CDS have existed since the early 1990’s and the market size increased tremendously to reach its peak at the end of 2007. The recent global financial crisis has revealed some shortcomings in CDS market practices and structure. This research explores credit derivatives through CDS and their effects on financial stability and on generating systemic risk.