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Home > QFINANCE Dictionary > Definition of credit default swap

Definition of

credit default swap

Stockholding & Investments

assumption of credit risk in return for payments 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.

Related definitions of "credit default swap"

Recommended Further Reading (Term count)
  • Hedging Credit Risk—Case Studies and Strategies
    This checklist examines credit risk and the instruments that may be used as hedges to reduce exposure.
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  • Credit Derivatives—The Origins of the Problem
    by Eric R. Dinallo
    There is no doubt that credit default swaps (CDSs) have played a major role in the financial problems the world now faces. As the insurance regulator for New York, the New York Insurance Department had a role to play in the development of CDSs. As they developed, there was a question about whether or not they were insurance. As they initially were used by owners of bonds to seek protection or insurance in the case of a default by the issuer of...
  • ERM, Best’s Ratings, and the Financial Crisis
    by Gene C. Lai
    The recent financial crisis has raised some questions, such as why enterprise risk management (ERM) was not able to prevent some large insurance companies from either becoming insolvent (for example, AIG) or from suffering large losses of their market value (for example, Lincoln National), and whether rating agencies properly perform their jobs.1 It is critical that insurance companies have effective ERM programs, and that rating agencies...

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

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