In recent years, we have seen considerable advances in the management and transfer of credit risk, including credit default swaps and collateralized debt obligations. These practices and the development of new and more liquid markets have come about because of better risk measurement techniques.
They have the potential, I believe, to substantially improve the efficiency of world financial markets through the diversification benefits  4  BIS Review 24/2004  that credit risk transfer mechanisms can provide. However, the fundamental elements of risk management must be kept firmly in mind if these innovations are to succeed.