Key facts
- Dealers are exploring the use of blind pools for fourth-trigger credit default swaps (CDSs).
- Blind pools involve undisclosed, replenishable baskets of reference names.
- This structure is already utilized in the synthetic risk transfer (SRT) market.
- The adoption of blind pools could alter how banks manage derivatives counterparty credit risk.
The market for fourth-trigger credit default swaps (CDSs) is considering the adoption of blind pools, which are undisclosed and replenishable baskets of reference names. This structure, already embraced by the loan market, could reshape how banks manage derivatives counterparty credit risk. Dealers see potential benefits in these blind pools, similar to their application in the synthetic risk transfer (SRT) market, allowing them to offload risk on a portfolio of undisclosed reference entities. However, not all market participants are convinced of the benefits or implications of this approach.