Credit trading


With long/short equity and other mainstream strategies in the doldrums, investors have been casting around for promising new areas of opportunity - and credit trading has emerged as flavour of the month with many established convertible-arbitrage houses and some new entrants launching funds.

In the main, CB arbitrage players began using credit derivatives to hedge credit risk on their convertible books, with most of them reaching first for asset swaps and then credit default swaps (CDSs).

In the past year, many have begun to see credit itself as an asset class - a whole new playground in which they can