ON DECK: CREDIT DEFAULT SWAPS

"Counterparty risks in the $60,000bn credit default swap market pose greater potential threats to banks and dealers than other over-the-counter derivatives markets such as interest rate swaps, according to a report by Moody's Investors Service.

The ability of securities dealers such as Goldman Sachs (NYSE:GS) , Morgan Stanley (AMEX:MWD) and UBS (NYSE:UBS) to manage the risks related to credit derivatives was a "particular area of focus" in assessing the dealers' credit ratings, Moody's said.

Alexander Yavorsky, assistant vice-president on Moody's finance and securities team, said: "It is not the size of the market that is of concern but the interconnected nature of the CDS market." More...