Credit derivatives are designed to alleviate a financial institution’s exposure on a high-risk borrower. They work as a sort of insurance policy for the financial institution to avoid losses if a borrower defaults on their loan. Unfortunately, some credit derivatives are not a wise investment and could cause financial harm to the borrower. If your advisor recommended that you invest in a credit derivative produced and suffered losses, contact us today.
Types of Credit Derivatives
There are a number of different types of credit derivatives. One of the most common are credit default swaps. A credit default swap (CDS) allows a lender or investor to “swap” the risk with another investor. Offsetting the risk of default protects the investor but at a premium and does not eliminate the default risk – it merely transfers it. Credit default swaps are often associated with the 2008 financial crisis.
Other kinds of credit derivatives include total return swaps and credit spread options which are unfunded credit derivatives and credit-linked notes and collateralized debt obligations which are types of funded credit derivatives.
Each type of credit derivative carries its own risk and may be an unsuitable investment. If you were advised to invest in credit derivatives leading to a loss, you might be entitled to recover. The first thing you should do is contact a knowledgeable credit derivatives attorney who can help you file a claim.
About Levin Law
Levin Law is a premier national class action, securities, commodities, and futures dispute resolution law firm. Brian Levin, Levin Law’s managing attorney, has obtained settlements and recoveries in excess of $100,000,000 in assets through arbitration and litigation for individual and institutional investors throughout the country and the rest of the world. Levin Law represents retirees, individual investors, high-net-worth investors, ultra-high-net-worth investors, institutions, family offices, trusts, publicly held companies, and others.
Our Miami Credit Derivatives Attorneys are here to help you understand the complex legal issues involved in broker misconduct. We will be your zealous advocate in the courtroom and throughout the entire process. Contact Levin Law today at (305) 402-9050 for a free, no-obligation consultation.
