New frontier for synthetics

The leveraged loan market is the latest area of the credit market to trade in a derivatives format. While still small compared with the $10 trillion bond-based credit default swap market, investors and dealers expect leveraged loan CDSs to thrive. By Rachel Wolcott

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A new frontier is opening in the credit derivatives markets, as credit default swaps (CDSs) referencing leveraged loans are quickly being taken up by investors. These investors partly see leverage loan CDS as a way to access credits unavailable in the senior unsecured CDS market. But they also see it as another approach to making trading profits through credit.

"The loan market is the next area of growth for credit derivatives," says Doug Grossberg, head of leveraged loan trading at Credit

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