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Home > QFINANCE Dictionary > Definition of CDS

Definition of

CDS

Stockholding & Investments abbr

assumption of credit risk in return for payments credit default swap: a derivative instrument similar in structure to an insurance policy, in which the buyer of the instrument agrees to make payments to the seller in return for a guarantee that the seller will assume the credit risk of a third party.

CDS - Related Articles

  • Default Position

    Viewpoints

    Few CEOs or heads of government demonstrate wisdom and courage when investors start buying naked credit default swap (CDS) protection against their company’s or country’s default. They are likely to complain that it is “like buying fire insurance on a neighbor’s house.”
    By Aaron Brown

  • Hedging Credit Risk—Case Studies and Strategies

    Checklists

    With a credit default swap (CDS), a buyer purchases a contract and makes regular payments to a seller of credit protection. In the event of a default, the buyer receives compensation from the seller. This is commonly seen as an insurance policy for the buyer. It can, however, be used speculatively

  • ALM in Financial Intermediation: The Derivatives Business

    Best Practice

    The ideas presented here are illustrated very well by the credit default swaps market and its role in the credit crisis of 2008, as well as in the subsequent sovereign debt crisis seen in Europe. A credit default swap (CDS) is a transaction between a buyer of a CDS and a seller of a CDS. Of course
    By Krzysztof M. Ostaszewski

  • Credit Derivatives—The Origins of the Problem

    Best Practice

    A CDS is a contract in which the seller, for a fee, agrees to make a payment to the protection buyer in the event that the referenced security, usually some kind of bond, experiences any number of various “credit events,” such as bankruptcy, default, or reorganization. If something goes wrong
    By Eric R. Dinallo

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Definitions of ’CDS’ and meaning of ’CDS’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’CDS’ and other financial terms with our online QFINANCE Financial Dictionary.

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