We review the limited available literature relating to markets for credit risk transfer. These markets
help to complete incomplete financial markets for credit risk by facilitating the isolation of credit risk
from other risks and extending the opportunities to manage credit risk. Yet, CRT markets give rise to
additional risk management problems, and they also create new asymmetric information problems.
Pricing for some CRT instruments also remains difficult. We identify the new problems created by
CRT markets in terms of their effects on relationships between borrowers and lenders and between
lenders and credit protection sellers. We also discuss how different forms of CRT instruments or
contracts mitigate the problems to differing degrees. Finally, we identify three channels through which
CRT markets may have financial stability implications: firms’ access to finance; monetary-policytransmission
mechanisms; and interactions between markets.