We examine the efficiency of hedging a credit derivative portfolio with a contrary position in a credit index in the … face of decreased correlations between single name CDSs and credit indices. The interest of such hedge comes from the fact … usually rather unstable due to the volatility of CDS spreads. Since credit derivatives on single names are not very liquid …

, the implied adjustments in capital charges could be reduced by hedging a credit derivative portfolio with a contrary … usually rather unstable due to the volatility of CDS spreads. Since credit derivatives on single names are not very liquid … position in a credit index. We examine the efficiency of such hedge in the face of decreased correlations between single name …

as a single-name credit instrument (i.e., a loan equivalent). While tractable, the loan-equivalent approach requires …. -- Collateralized debt obligations (CDO) ; arbitrage CDOs ; credit rating ; expected loss profile ; bond representation ; systematic …