The credit derivatives markets is setting the price tag for settling up to $500 billion of contracts related to Fannie Mae and Freddie Mac, reports The Financial Times.

This price—called the recovery value—will in turn determine the payouts that have to be made by insurers and banks that offered credit cover on the mortgage financiers in recent months.

Unwinding and settling these derivatives will be the biggest test yet for the thus-far unregulated $54 trillion credit derivatives market, which is likely to be brought under stricter supervision amid concerns from regulators that its exponential growth helped fuel the credit bubble.

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