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A decrease in inflation rates typically leads to an increase in the price of fixed income instruments like bonds. Lower inflation increases the real value of the fixed payments received from bonds, making them more attractive to investors and driving up their prices.

Asian options are path-dependent options, which means their payoff depends on the average price of the underlying asset over a certain period, rather than just the price at maturity. This characteristic makes them path-dependent because the path taken by the asset's price during the life of the option affects the payoff, unlike path-independent options which only depend on the final price at maturity.

When a credit analyst evaluates spreads in loans, they focus on compensating for costs such as the marginal cost of funds provided, overhead costs of maintaining the loan, and inherent risks of lending to the borrower. However, the opportunity cost of the risk-adjusted marginal cost of capital is not typically considered directly in the spreads. The opportunity cost generally refers to the potential returns from alternative investments, which isn't a direct component of loan spread calculations.

Credit derivatives historically carry several specific types of risk:

Documentation Risk: The risk arising from the complexity and potential ambiguity in the legal documentation of credit derivative contracts.

Definition of Credit Events: The risk associated with the precise definition of what constitutes a credit event, such as a default, which can be subject to interpretation and affect payouts.

Occurrence of Credit Events: The actual risk that a credit event will occur, triggering the derivative contract.

Enterprise risk is a broader category that typically includes all risks faced by an enterprise, not just those associated with credit derivatives.

References

Verified information on credit derivative risks from the document ​