In recent years, discussions of financial innovation and risk management have invariahlv turned to credit derivatives. Although these instruments are drawing increasing attention' and growing in importance', credit derivatives remain an ob.scure subject for many participants in the financial markets. The following is drawn largely from a presentation made by Frank Fernandez. Senior Vice President. Chief Economist and Director of Research. Securities Industry A.ssociation. al the Rutgers Business School conference on Financial Innovation: Session IV: Financial Innovation and Risk Management— Credit Derivatives, which look place in New York City on November 12. 2004.