Credit Default Swap

This Issue in United States

Concept of Credit Default Swap in Futures Trading

In this context of financial law, the following is a definition of Credit Default Swap: A bilateral over-the-counter (OTC) contract in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments; the most common type of credit derivative; also called a credit swap; similar to credit default option.

Credit Default swap (cds)

Concept of Credit Default swap (cds) in the context of derivatives contract, by the International swaps and Derivatives Association (ISDA): A contract designed to transfer the credit exposure of debt obligation between parties. The buyer of a credit swap (i.e. a derivative where two counterparties exchange streams of cashflows with each other) receives credit protection, whereas the seller of the swap (i.e. a derivative where two counterparties exchange streams of cashflows with each other) guarantees the credit worthiness of the underlying security. In a CDS the risk of default is transferred from the holder of the security to the seller of the swap (i.e. a derivative where two counterparties exchange streams of cashflows with each other). Most credit derivatives take the form of credit default swap (i.e. a derivative where two counterparties exchange streams of cashflows with each other)s.

Resources

Loan-only credit default swap (lcds)

Concept of Loan-only credit default swap (lcds) in the context of derivatives contract, by the International Swaps and Derivatives Association (ISDA): A credit default swap (a contract designed to transfer the credit exposure of debt obligation between parties) where the underlying is a syndicated secured loan rather than any other asset class (for example bond, unsecured loan or asset backed security).

Resources