A group of traders at investment banks is set to unveil a new kind of derivative instrument, assisted by the International Swaps and Derivatives Association, The Wall Street Journal reports. The move will help the traders reduce the risk of a growing correlation between interest rates and risk premiums in the credit markets. The new contingent credit default swaps (CCDS) will let traders speculate or hedge against a group of companies and to be paid out pro-rata based on the weighting of a defaulted company in the index. CCDS buyers will pay a percentage of the contract premium upfront, based on the value of the underlying swap, but no annual installments over the life of the swap.

Click here for the story from The Wall Street Journal.