Credit derivatives are financial contracts that shift credit risk from one party to another. Researchers used simulation to study credit risk, starting with the Merton model for firm value and default. They then added the Vasicek model to assess portfolio risk and price collateralized debt obligations. By analyzing Gaussian and t-copulas, they found these models are crucial for predicting default events. Finally, they calculated the credit value adjustment for counterparty risk in the OTC market, especially important after the subprime mortgage crisis.