CDS de-correlation a threat to CVA hedging, traders warn

Fears relationship between credit indexes and constituents becoming more tenuous

Hall of mirrors: Fears some credit products bear little relation to reference assets

The ongoing slump in traded volumes of single-name credit default swaps (CDSs) is a "nasty side effect" of international regulatory reforms, a senior banker has claimed, raising fears that credit valuation adjustment (CVA) hedging will become increasingly difficult should the long-standing correlation between single-name and index CDS products break down.  "There is a lot less credit protection around than everybody would like. The US liquid single-name CDS population is relatively small