Financial Model

International Journal of Advanced Research in Management and Social Sciences

ISSN: 2278-6236

DEBT MARKET AND CREDIT DERIVATIVE INSTRUMENTS IN INDIA: ITS CONTRIBUTIONS, ISSUES & CHALLENGES

Dr. Sanjeeb Kumar Dey* Manik Chand Dey** Abstract: The funds requirement of corporate world can be solved both from equity and debt market. However, projects having high gestation period largely depends on debt and that demands high debt and CDS instruments. Credit is the spinal cord on which the entire body of an economy rests. Globalization and liberalization, more pronounced in the last decade, led to the expansion of world market which could be taken as a proxy to measure the exponential growth of the credit market. But it is observed that the volume of credit market, especially credit derivatives market has exceeded everyone’s expectations since their introduction in the early nineties. Being the OTC products, these are perceived as the most sophisticated and to some extent, hyped risk management tools because some analysts advocate that credit risk ceased to exist with their arrival. On the contrary these are also perceived as the real culprit in sub-prime crisis which unnecessarily put a financial institution in a position to bear credit risk without knowing its source of origination. This practically handicaps the effective regulation of such complex products. In this context, this paper attempts to explore the regulatory challenges and real contribution of these products to the financial world. Key words: Credit derivatives, Debt market, Interest rate derivatives

*Asst. Professor in Commerce, School of Commerce & Management Studies, Ravenshaw University, Cuttack, Odisha, India. **Faculty in Finance, Balasore College of Engineering and technology, Balasore, Odisha, India. Vol. 3 | No. 1 | January 2014 www.garph.co.uk IJARMSS | 78

International Journal of Advanced Research in Management and Social Sciences

ISSN: 2278-6236

INTRODUCTION:

The funds...