Could someone please explain why with credit derivatives the transfer of credit risk is done on a confidential basis unlike loans where the referenced entity is party to the transaction. Thank you
A transfer of a loan must involve the “issuer”. They need to know who to repay. A transfer of credit risk via a CDS is between two parties and can be completely independent of the issuer. It is possible that none of the CDS counterparties have any direct exposure to the issuer. Think of a CDS as a “side bet” based on whether the issuer defaults or not.