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What are credit swaps?
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21st Nov 2009 by cocacolabuffet
A credit swap is also known as a credit default swap (CDS)
A credit swap is a financial contract in which one counterparty pays a periodic fee, usually as a basis point per annum, based on the notional amount of the underlying asset in exchange for protection from credit risk.
The counterparty who pays the fee is the protection buyer. The recipient of the fee is the protection seller who provides certain predetermined amount and method of contingent compensations for the protection buyer¡¯s losses following a pre-defined credit event (a default, a material debt restructuring, etc).
A credit swap is also known as a credit default swap (CDS)
A credit swap is a financial contract in which one counterparty pays a periodic fee, usually as a basis point per annum, based on the notional amount of the underlying asset in exchange for protection from credit risk.
The counterparty who pays the fee is the protection buyer. The recipient of the fee is the protection seller who provides certain predetermined amount and method of contingent compensations for the protection buyer¡¯s losses following a pre-defined credit event (a default, a material debt restructuring, etc).
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11th Nov 2009 In Investing
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Subjects: credit swaps,