O'Reilly logo

Mastering Credit Derivatives: A step-by-step guide to credit derivatives and structured credit, Second Edition by Andrew Kasapis

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 2. Credit derivative instruments and applications

Credit Derivatives Products

The credit default swap is the basic building block for most ‘exotic’ credit derivatives and hence, for the sake of completeness, this chapter sets out a short description before exploring more exotic products. A credit default swap (CDS) is used to transfer the credit risk of a reference entity (corporate or sovereign) from one party to another. In a standard CDS contract, one party purchases credit protection from the other party, to cover the loss of the face value of an asset following a credit event. A credit event is a legally defined event that typically includes bankruptcy, failure to pay and restructuring.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required