There is growing consensus 7 that the flexibility provided by derivatives, whereby risks can be traded separately, has the potential to facilitate risk-sharing, to enhance the efficiency of risk management, and to promote market completeness.
Credit derivatives, in particular, may offer investors a tool enabling them to exploit their comparative advantage in terms of assuming different types of risk as well as the corresponding remuneration for these risks. As already stated, banks are using credit risk transfer instruments, including securitisation, to distribute credit risk exposures acquired in their lending business to non-banks.