Credit exposure is a source of risk that is present in almost all financial transactions and credit derivatives provide the most innovative method to manage this risk. Among the different categories of credit derivatives, this thesis concerns only default products such as credit default swap, collateralised debt obligation and credit linked note. The thesis aim to describe the most commonly used credit derivatives and how a Swedish bank may use these. Also, the basics of pricing with a model called the reduced form credit pricing model will be explained and how this model can be calibrated from real market data. Although the origin of credit derivatives was the need of a new risk-management tool the main use of credit derivatives is rather investment trading with the purpose to earn speculative profits.