Credit Default Swap
/ˈkrɛdɪt dɪˈfɔlt swɑp/
Definitions
- (n.) A financial derivative contract in which the buyer receives credit protection, compensating for losses if a borrower defaults on a debt obligation.
The investor purchased a credit default swap to hedge against the risk of the bond issuer's default.
Forms
- credit default swap
- credit default swaps
Related terms
See also
Commentary
The term specifically refers to a contract that transfers credit exposure; drafting should clarify parties' obligations upon default events.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.