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Capital Markets Law Journal, Vol. 1, No. 1 21 Self-referenced credit derivatives – are they enforceable under English law? Simon Firth* Key points Credit derivatives (transactions which transfer the credit risk associated with a specified ‘reference entity’) are now an important aspect of the financial markets. Generally, the reference entity is a third party but it may instead be one of the parties to the transaction (or another member of its group). A transaction could therefore involve a party making an up-front payment (in the form of collateral or the subscription price for an issue of notes) on the basis that, if a ‘credit event’ occurs in relation to it, it will receive only a part of the payment back on maturity. The credit events invariably include various insolvency events, such as the commencement of winding up. A key concern is whether these transactions may be attacked by a liquidator of that party. 1. Introduction In the burgeoning world of structured finance, credit derivatives represent one of the most successful products. Practically unheard of 12 years ago, the market now has a value of some US$ 8 trillion and continues to grow. The attraction of the products lies in
Capital Markets Law Journal – Oxford University Press
Published: Jul 1, 2006
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