Credit risk

Special report

tearupcontract

The credit default swap (CDS) market has one or two possibly crucial tests ahead of it – so crucial, in fact, that some participants reckon the results could determine the credibility of at least parts of the market in the longer term. That might seem a little far-fetched, but the list of potential challenges looks daunting. First, there’s the regulatory issue. European legislators are continuing to flirt with the idea of a ban on naked shorting of sovereign CDS contracts. The Eur