Dealers call for ban on downgrade triggers

Policeman in front of no entry sign

Regulators should prohibit rating downgrade triggers within derivatives contracts, as they could pose systemic risk in concentrated markets, dealers warn.

Downgrade trigger options allow a client to terminate a trade when a counterparty breaches a pre-specified rating level, and force the downgraded party to stump up the replacement cost. The problem is that no-one can know for sure what that will be, and it is likely to be much higher in stressed market conditions, or in asset classes that are

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

If you already have an account, please sign in here.

Register

Want to know what’s included in our free membership? Click here

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: