CDS Reference Obligation

From Open Risk Manual


CDS Reference Obligation. The underlying obligation against which the Credit Default Swap provides Credit Protection. The Reference Obligation is a financial instrument that is either issued or guaranteed by the reference entity. It serves to clarify the precise reference entity protection is being offered upon, and its legal position with regard to other related firms (parents/subsidiaries).


FpML adds "Furthermore the Reference Obligation is always deliverable and establishes the Pari Passu ranking (as the deliverable bonds must rank equal to the reference" however this is not borne out in all cases (sometimes the Deliverable Obligation is NOT the Reference Obligation.

This term is what we are referrring to when we refer to the Credit Event.


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