Username: LuckyMan Rating: Asked to: Talitha Taslim Date Created: 28 Oct 2015 |
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Category | 40 |
Tag | Financial |
Question | What is a credit default swap? |
Hi LuckyMan, A credit default swap is a particular type of swap designed to transfer the credit exposure of fixed income products between two or more parties. In a credit default swap, the buyer of the swap makes payments to the swap’s seller up until the maturity date of a contract. In return, the seller agrees that, in the event that the debt issuer defaults or experiences another credit event, the seller will pay the buyer the security’s premium as well all interest payments that would have been paid between that time and the security’s maturity date. A credit default swap is the most common form of credit derivative and may involve municipal bonds, emerging market bonds, mortgage-backed securities or corporate bonds. A credit default swap is also often referred to as a credit derivative contract. |
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