A credit derivative is a financial instrument intended to transfer the risk of the total return in a credit transaction by hedgers and speculators. These products are useful for institutions with widespread credit exposures and are believed to herald a new era in international banking, where banks are very much exposed to diversified credit risk as compared to other lenders.

I winced at the fixed stare from that graying, paunchy banker in a mauve safari suit seated on a swivel chair behind that glass-topped table in the cabin. Many of my friends had already warned me about the loquacity of this banker, but I was helpless as I had to put up with it, as I had to wait for at least for some time to obtain the demand draft I had applied for. So I steeled myself and returned the glare. Evidently he was agitated and I knew that the open file before him named "Credit Derivatives" triggered his emotion by reminding something portentous.

"Do you know I am sitting on a time bomb?" he asked as if it was an unpardonable offence not to know his plight.

In reply I stared, for I am not deaf and I heard no ticks. Even then I did sweat, because I had to wait and collect the draft. I prayed that the bomb should not go off till then. However, I managed a forced smile.

His shrewd eyes did not fail to notice my alarm. "Look at this," he chuckled pointing to an HP monitor that stood on his table. Giving a few violent taps to the keyboard, he opened the system and the monitor displayed clusters of numerals in `columns' and `rows'. "This is my portfolio of loans and investments, the `income generators', the lifeline of the bank. But some accounts, like a time bomb, can tick themselves into bringing down the bank as a smoking heap of debris."

Treasury Management Magazine, Credit Derivatives, Financial Instruments, International Banking, Risk Management, Financial Instruments, Credit Derivative Products, Credit Default Swaps, CDS, Credit Derivative Contracts, Cash Reserve Ratio, CRR, Metaphoric Bombs, Statutory Liquidity Ratio.