A specific kind of counterparty agreement which allows the transfer of third party credit risk from one party to the other. One party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange of regular periodic payments (essentially an insurance premium). If the third party defaults, the party providing insurance will have to purchase from the insured party the defaulted asset. In turn, the insurer pays the insured the remaining interest on the debt, as well as the principal.
Related information about credit default swap:
- Credit default swap - Wikipedia, the free encyclopedia
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event .
- Credit Default Swap (CDS) Definition | Investopedia
A swap designed to transfer the credit exposure of fixed income products between parties. A credit default swap is also referred to as a credit derivative contract, ...
- HowStuffWorks "What are credit default swaps?"
The Credit Default Swap Situation ... 01 October 2008. HowStuffWorks.com. <http ://money.howstuffworks.com/credit-default-swap.htm> 29 November 2012. Cite ...
- How Credit Default Swaps Became a Timebomb - Newsweek and ...
Sep 26, 2008 ... The scheme was called a "credit default swap," and it was a twist on ... Within a few years, the credit default swap (CDS) became the hot ...
- Credit Default Swaps: The Next Crisis? - TIME
Mar 17, 2008... the cost of protecting its debt, through an instrument called a credit default swap, began to rise rapidly as investors feared that Bear would not ...
- Restructurings and the Impact of Credit-Default Swaps - NYTimes.com
Nov 6, 2012 ... To our minds, this represents one workable solution to the challenges that credit- default swap contracts create for resolution of financial distress ...
- Credit-Default Swap Market, Like Libor, Is Vulnerable to ...
Jul 18, 2012 ... A proper market would want an organization that was impartial, regulated, transparent and open to appeal, but with credit default swaps, there ...
- Credit Default Swaps - YouTube
Sep 28, 2008 ... So unless it has enough cash to cover EVERY single CDS, and it doesn't, it's technically ... I never truly understood CDS's before this video.