On March 26, Tao Xiang International Finance Lectures (No. 9) was held at Renmin University of China. Dr. Fan Xiwen, Chief Risk Officer of China-Latin America Cooperative Fund, delivered a speech on "Credit Risk Management: Innovation and Application of CDS". The lecture is chaired by Prof. Tu Yonghong, deputy director of IMI.

Dr. Fan elaborated and analyzed the special financial derivatives of CDS from the perspective of the emergence, development, evolution, characteristics and problems of CDS. He stressed that the difference between CDS and credit guarantee is that the reason for creating this derivative is to avoid the risk of bonds rather than a specific debt. At the same time, the pricing and circulation of this derivative depend on the existence of the secondary market.

He pointed out that as a tool to manage, circumvent and hedge credit risk, CDS revolutionized the separation of cash flow and risk, and had a unique role in improving capital operation efficiency, releasing capital and developing trading strategies. At the same time, CDS as a credit derivative can continue to produce and derive infinitely outside investors, leading to the spread of risks. Coupled with its market system and internal interests of the situation, CDS has become the initial cause for 2008 financial crisis.

Regarding the development process and application prospect of CDS in China, Dr. Fan suggested that China should establish a relevant regulatory system for CDS, recognize its usefulness, focus on solving the secondary market pricing and recycling system, make clear judgments and develop solutions to better play the role of CDS in financial markets.

It is reported that Dr. Fan Xiwen is currently the chief risk officer of China-Latin America Cooperative Fund and a senior professor of Economics and Finance at Renmin University of China. Before returning home in 2015, Dr. Fan served as Senior Vice President and General Manager of the Risk Analysis Model Department at Radiant Assets Assurance Company in New York. Prior to that, he was the Co-Head, responsible for trading credit and structured products. He had also been theCheif Risk Officer of the business department of BNP Paribas in New York.