Category:Credit Default Swaps

From Open Risk Manual

A transaction and contract in which one leg is the conditional commitment to pay out on some debt in the event that a pre-defined credit event takes place. The contract may make reference to a specific debt instrument or loan, or take effect in the event of one of a range of events that happen to the business entity that is the debtor in that debt. Includes terms for different kinds of settlement arrangement. Note that these are a swap in name only, since under normal conditions there is only one stream of payment, the fee payment leg.