Credit market complacency

Central bankers and regulators are worried about credit derivatives. Over the past year, many have voiced their concern that a credit downturn could unleash untold systemic risk, causing the relatively untested credit default swap (CDS) and structured credit markets to come apart at the seams.

The global collateralised debt obligation (CDO) market has ballooned to an estimated $481 billion, according to research from Dresdner Kleinwort published last month, while the credit derivatives market