ABSTRACT
Chapter 4 speaks to debates in political economy about the desirability of credit derivatives. This chapter illustrates that since their inception in the 1990s, the Bank of England has been aware of both the positive and negative risks associated with credit derivatives and has presented these risks as being two sides of the same coin. As credit derivatives issuance increased during the first half of the 2000s, the Bank was aware of the way that investment risk management was becoming increasingly complex. During the prelude to the Global Financial Crisis, the Bank’s analysis sharpened on the way that it was less certain where risk was being distributed.
