Wrap-up Discussion

I would like to focus my attention on the fi rst part of this Conference, which covered issues associated with fi nancial innovation and the problems which led to and exacerbated the recent episode of fi nancial turmoil. These have prompted a lot of discussion about ways in which fi nancial markets allow risk to be shared and raised concerns about how these markets have operated. There has also been much discussion of the appropriate role of regulators in this environment. For my part, I would like to extend this general discussion with some specifi c points about the market for a particular credit instrument which has grown very rapidly in recent years; that of the credit default swap (CDS). I contend that some of the insights that we can draw from examining this market give us a general sense of the types of problems that we need to address. I am also of the view that the effects of the fi nancial turmoil on this particular market are yet to be played out fully.