Journal Press India^®

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The derivatives market in India got a shot in the arm with the Government deciding to treat income from derivatives trading as a non-speculative income. The decision to treat income from derivative trading as a non-speculative income has contributed to an increase in the trading volume in the derivative market since it provides for setting off of derivative income/loss against normal income/loss. This paper looks at the functioning of the derivatives market along with special focus on credit derivatives. Since the early 1990s, there has been proliferation of different types of credit derivatives in several countries. We examine various forms of credit derivatives such as Credit Default Swap (CDS), Total Return Swap (TRS), and Credit Linked Note (CLN). The paper also analyses the benefits and risks involved in credit derivatives.

Keywords

Derivatives market; Credit derivatives; Credit Default Swap; Total Return Swap; Credit Linked Note

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