Credit Derivatives and Risk Management: Corporate Governance in the Sarbanes-Oxley World
Journal of Business Law, Vol. 331, 2009
23 Pages Posted: 21 Jul 2009 Last revised: 28 Jun 2013
Date Written: May 1, 2009
Credit derivatives were at the centre of the recent meltdowns in the financial sector. The article analyzes credit derivatives and their risks from the perspective of corporate governance. The present model of governance is based on management by executives, oversight by the board of directors and audit by independent professionals. The article identifies significant gaps in this structure of governance, in particular the level of involvement of the board in performing its function of monitoring business and risk, and the scope of independent audit. The article proposes regulatory prescription of 'minimum board responsibilities' and mandatory risk assessment.
Keywords: Credit derivatives, collateralized debt obligations, credit default swaps, corporate governance, board oversight, risk management, independent audit, securities law, disclosures
JEL Classification: G30, G32, K20, K22, L20, M10
Suggested Citation: Suggested Citation