Citibank 2010 Annual Report Download - page 133

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The credit valuation adjustment amounts shown above relate solely to the
derivative portfolio, and do not include:
Own-credit adjustments for non-derivative liabilities measured at fair •฀
value under the fair value option. See Note 25 to the Consolidated
Financial Statements for further information.
The effect of counterparty credit risk embedded in non-derivative •฀
instruments. Losses on non-derivative instruments, such as bonds
and loans, related to counterparty credit risk are not included in the
table above.
Credit Derivatives
Citigroup makes markets in and trades a range of credit derivatives, both
on behalf of clients as well as for its own account. Through these contracts
Citigroup either purchases or writes protection on either a single-name or
portfolio basis. Citi primarily uses credit derivatives to help mitigate credit
risk in its corporate loan portfolio and other cash positions, and to facilitate
client transactions.
Credit derivatives generally require that the seller of credit protection
make payments to the buyer upon the occurrence of predefined events
(settlement triggers). These settlement triggers, which are defined by the
form of the derivative and the referenced credit, are generally limited to
the market standard of failure to pay indebtedness and bankruptcy (or
comparable events) of the reference credit and, in a more limited range of
transactions, debt restructuring.
Credit derivative transactions referring to emerging market reference
credits will also typically include additional settlement triggers to cover
the acceleration of indebtedness and the risk of repudiation or a payment
moratorium. In certain transactions on a portfolio of referenced credits
or asset-backed securities, the seller of protection may not be required
to make payment until a specified amount of losses has occurred with
respect to the portfolio and/or may only be required to pay for losses up to a
specified amount.