December 19 - Financial Times (Tracy Alloway): "Big investors have been buying hundreds of billions of dollars worth of exotic credit derivatives to protect themselves against the possibility that growing numbers of corporate bond issuers will default.

Options that give investors the right to buy insurance against bond defaults have exploded in popularity this year as asset managers and hedge funds seek to affordably offset the risk of a big blow-up in credit.

Trading volumes of the instruments - known as credit index options or swaptions - have jumped 148% in the past 12 months, with about $1.4tn of the instruments exchanging hands in 2014 compared with $573bn in 2013.

'You can buy a very leveraged bet that the market will collapse using credit index options,'?said Andrew Jackson, chief investment officer at Cairn Capital. He added: 'That is definitely the hedge of choice for real money investors who don't really care that much about the level of volatility, but care about the amount of dollars they're paying to hedge against Armageddon risk.

' Credit indices, such as Markit's iTraxx or CDX series, are credit default swaps (CDS) written on baskets of corporate credits that investors and traders may use to hedge, or offset, their exposure to corporate debt or to make bets on the way the underlying companies will perform.

Credit index options act in a similar way to options on other assets, such as stocks, by giving the holder the right to enter into a CDS contract at a certain time in the [...]