Which stage follows the emergence of intermediaries in the development of credit derivatives?

The emergence of intermediaries in the development of credit derivatives is a critical phase that facilitates more sophisticated trading and risk management practices. Following this stage, the next logical step is the development of regulations.

As credit derivatives gained popularity and more participants entered the market, the need for regulatory frameworks became apparent. These regulations were important to ensure market stability, protect investors, and promote fairness in trading. Regulatory oversight helps mitigate systemic risk, provides clarity on financial transactions, and enhances transparency in the markets. It also lays the foundations for the market to grow securely, as participants feel more confident engaging in potentially complex and high-stakes trading environments.

While a liquid market, defensive stage, or market inefficiencies could occur in later stages of the credit derivatives lifecycle, the development of regulations directly follows the emergence of intermediaries because regulation serves as a key framework that supports and enhances the functioning of a growing market.