questions:1) On credit exotics like extendable CDS/CLN, say a product like a Bermudean callable note linked to a credit with a tenor. But the note can be extended by issuers. It says that 1st order risk in pricing is the default probaility till 1st exericse date and the option value of the extension option. How is this extension priced ? is it something related to a credit default swaption ? Then it says something like a 2nd order figure in pricing is the correlation between the default prob. and the forward yield of the note. Why is this a 2nd order parameter ? This should have been as important as the other ones ? how to hedge this kind of instrument ? WHere can i find some risk grapsh like vega, CS01... gamma... how it looks like ?2) "impact of credit/rate correlation" Without too mathematical (i.e. brownian motion), does this always increase or decrease the NPV of the note/swap ? How to undertand it qualitatively3) On this paperhttp://www.risk.net/risk-magazine/feature/1498 ... redit-risk - How to estimate the implied correlation ? Historical + a bump (based on fischer transform, quantile... etc.) ? How to buy back correlation ,e tc. "This means the dynamic hedging process requires two-factor models to analyse the correlation of the trade to a particular credit, and also against the exchange rates of the currency swap. While the bank is able to sell buckets of currency to hedge oscillations in the currency swap transaction, factoring in the correlation of the currency movements against the credit risk is complex. ?We tend to make a conservative correlation assumption and delta-hedge the first-order risks using plain vanilla swaps and credit default swaps,? says Bates. ?Over time, we hedge the correlation risk with more structured transactions. - I don't understand below why right-way swaps become credit-steepeners. Why buying long-dated bonds + short-dated CDS is a flattener 1st order hedge ? "Right-way swaps become credit-steepeners when they are made credit-contingent. The first-order credit hedge is therefore a flattener, which we typically execute by buying long-dated bonds and short-dated credit default swaps,? he adds. " Thanks mate