Hedging spurs growth in credit swaptions

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Credit swaptions: a hedge against volatility

Credit swaptions are increasingly popular with market participants looking for hedges – a trend that is likely to be maintained in 2011, according to dealers.

With similar declines in trading volumes across credit derivatives, credit swaptions took a knock after the bankruptcy of Lehman Brothers in September 2008. But since the second half of 2009, dealers say trading volumes in the product have picked up, with some estimating a doubling of notional for every six-month period since then.

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