China Securities Re-Introduces Credit Hedging Tool Amid Rising Defaults
- The revival of China Securities' CRMW comes at a time when the number of bond defaults is increasing.
China Securities Co, a Beijing-based brokerage, is planning to issue a credit derivative instrument, restoring an essential hedging tool against default risks as a growing number of firms struggle to pay debts in a declining economy, according to Reuters today.
In a statement on the website of the National Association of Financial Market Institutional Investors (NAFMII), the brokerage said that the instrument called Credit Risk Mitigation Warrants (CRMWs), the Chinese version of Credit Default Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term (CDS), will be issued in China's interbank market.
CRMWs were initially introduced in 2010, but issuance and trading in the product was limited. The revival of China Securities' CRMW however comes at a time when the number of bond defaults increase, fuelling demand for hedging tools.
China's banking regulator has said that the government will not open its treasury futures market to commercial banks anytime soon due to Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term concerns, although it admitted that banks need this market to manage risks in the longer term.
As well as bond holders, stock investors in China also suffer from a shortage of hedging tools, as regulators have restricted index futures trading following last summer's market crash. Borrowing stocks for shorting is also difficult.
China Securities has reportedly said it will issue CRMWs with a notional value of 800 million yuan ($120.03 million), while the underlying debt for the CRMW are asset-backed securities issued by a trust company.
China Securities Co, a Beijing-based brokerage, is planning to issue a credit derivative instrument, restoring an essential hedging tool against default risks as a growing number of firms struggle to pay debts in a declining economy, according to Reuters today.
In a statement on the website of the National Association of Financial Market Institutional Investors (NAFMII), the brokerage said that the instrument called Credit Risk Mitigation Warrants (CRMWs), the Chinese version of Credit Default Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term (CDS), will be issued in China's interbank market.
CRMWs were initially introduced in 2010, but issuance and trading in the product was limited. The revival of China Securities' CRMW however comes at a time when the number of bond defaults increase, fuelling demand for hedging tools.
China's banking regulator has said that the government will not open its treasury futures market to commercial banks anytime soon due to Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term concerns, although it admitted that banks need this market to manage risks in the longer term.
As well as bond holders, stock investors in China also suffer from a shortage of hedging tools, as regulators have restricted index futures trading following last summer's market crash. Borrowing stocks for shorting is also difficult.
China Securities has reportedly said it will issue CRMWs with a notional value of 800 million yuan ($120.03 million), while the underlying debt for the CRMW are asset-backed securities issued by a trust company.