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Master chefs of the credit market

In the back parlours of the financial markets, where credit derivatives meet securitization, bankers are slicing and dicing credit to create a grand smorgasbord of investment products. The names of these delicacies are confusing, the recipes are closely guarded secrets and each firm has its own unique house style. But for firms and bankers with the requisite know-how, there is plenty of money to be made. The top credit structurers – bankers with a background in quant, an understanding of credit and a flair for complex legal contracts – can name their price.

by Michael Peterson

From single names to exotics

When credit spreads narrowed sharply in early May, investors and issuers breathed a sigh of relief. But the rise in corporate bond prices was not driven by a rally in equities or an interest rate cut. A new and powerful force was at work in the credit markets. "That tightening of credit spreads was driven almost entirely by the credit derivatives market," says a senior credit derivatives trader.

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