Stage 18. Credit Derivatives
Credit derivatives are one of the most recent financial innovations in the banking industry. Allowing banks to sell or buy the credit risk on a loan or a portfolio of loans, they succeed in separating the funding of loans from the holding of the credit risk. New jargon and acronyms include: protection buyer and protection seller, obligor, CDS, TRORS, CLN, credit event, credit event payment and synthetic securitization.
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