Default Swap
/ˈdɪfɔːlt swɑːp/
Definitions
- (n.) A financial derivative contract in which one party transfers the credit risk of a third party to another party, typically used to hedge against or speculate on the default of a debtor.
The investor purchased a default swap to protect against the risk of the company failing to repay its debt.
Forms
- default swap
- default swaps
Related terms
See also
Commentary
Default swaps are a form of credit default swaps; precise drafting should define parties' obligations upon a credit event clearly.
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