Credit vs Equity Derivatives

Credit derivatives are financial contracts that allow investors to manage exposure to the risk of default on debt, such as loans or bonds. They can be used to protect against losses if a borrower fails to pay back their debt. In contrast, equity derivatives are linked to the performance of underlying stocks or stock indices. They are often used for speculation or to hedge against price changes in the stock market. Essentially, credit derivatives focus on debt risk, while equity derivatives focus on stock market movements. Both are tools to manage financial risk in different ways.