– or to buy the credit derivatives. several large - scale credit events in recent years, such as the downgrading of ford ’ s and gm ’ s credit ratings last spring, have also shown that more or less serious problems could be solved without liquidity in the market being affected to any great extent. 4. risk of mispricing finally, i would like to bring up the risk of mispricing, a risk that in many respects is closely related to the liquidity risk. during the same period as the volumes of credit derivative have grown most, interest rates have gradually fallen and credits have increased. there have been unusually few bankruptcies. the interest rate differences between high - risk and low - risk bonds have therefore declined, that is, credit spreads have shrunk. the price of credit derivatives has fallen correspondingly. the compensation for risk has thus reached a level far below the historical average. the question is what will happen when economic activity shows a downswing and the number of bankruptcies begins to increase again. if investors have in general underestimated the credit risk, we may see a substantial adjustment in risk premiums. this will also lead to a fall in prices of corporate bonds and credit derivatives. in this situation, individual actors with large net exposures in credit risks may be affected by significant losses. but i would like to emphasise that this is a general line of reasoning. if risk premiums rise, this would have effects on most markets. there is no particular reason to assume that the credit derivatives market would be hit harder than others. my opinion is that each of these risks should be taken seriously. but they are nevertheless not so large that they risk bringing about a serious systemic crisis in the international financial system. i have now discussed the credit derivatives trade in the international market. here in sweden trade in credit derivatives is still very limited. but let me nevertheless round off with a few comments on the swedish market and its potential. how are credit derivatives used in sweden? as you may know, sweden currently has one of the world ’ s most developed derivative markets. this is seen in relation to the size of the economy and the turnover on the stock market. but when it comes to credit derivatives, the situation is different. here the trade is much more limited. this is primarily due to our corporate bond market being so small. and without corporate bonds, it has been difficult to trade in credit derivatives. the major swedish banks base their core activities on long -

that is, the direct impact on petrol prices, but rather the second round effects that are of primary concern for monetary policy purposes. while there is little we can do about first round effects, we have to ensure that these effects do not adversely affect inflationary expectations and become more generalised and stimulate inflationary impacts across the economy. if sustained, the recent decline in oil prices augurs well for inflationary developments going forward. nevertheless, given the underlying market conditions and the vulnerability of oil prices to geopolitical tensions, these lower prices cannot be taken for granted and oil prices continue to pose an upside risk to our inflation outlook. 7. conclusion monetary policy has to be formulated against the backdrop of increasingly integrated goods and financial markets. this increases the uncertainty surrounding the workings of the monetary transmission mechanism. monetary policy making becomes more complicated since the nature and extent of influence of exogenous shocks on the domestic economy is difficult to determine in advance. with highly integrated money and capital markets, changes in sentiment, whether justified or not, can have profound implications for our economy. similarly, changes in growth prospects in the industrialised countries or emerging asian economies will also affect us. the exact nature and timing of these developments are always uncertain. as is often said in monetary policy circles, the only certainty is uncertainty. this is highly applicable to the uncertain impact of international developments on domestic monetary policy. i thank you.