When you hold a corporate bond or a credit derivative in a trading book, you are not just exposed to the company going bankrupt — you also face the slow grind of credit downgrades, spread widening, and the risk that several names sour at once. This chapter builds the tools to measure that risk, from short‑term migration matrices to copula models of joint default, and shows how single‑name CDS, basket swaps, and securitization tranches can be used to hedge it.