a non-fund based contract when one person agreed to undertake, for a fee, the risk inherent in a credit without acting taking over the credit
Broadly defined as a derivative contract whose value changes with regard to changes in the credit risk of an underlying reference credit.
A term used for a number of financial derivatives that can be used for trading in credit risk.
A financial structure added to or deriving from a credit risk to improve its standing.
An over-the-counter (OTC) derivative designed to assume or shift credit risk, that is, the risk of a credit event such as a default or bankruptcy of a borrower. For example, a lender might use a credit derivative to hedge the risk that a borrower might default or have its credit rating downgraded. Common credit derivatives include Credit Default Options, Credit Default Swaps, Credit Spread Options, Downgrade Options, and Total Return Swaps.
A contract allowing for the transfer of credit risk via a derivative instrument. The party transferring credit risk is obliged to pay a fee to the transferee.
A derivative instrument designed to transfer credit risk from one party to another.
A credit derivative is a contract (derivative) to transfer the risk of the total return on a credit asset falling below an agreed level, without transfer of the underlying asset. This is usually achieved by transferring risk on a credit reference asset. Early forms of credit derivative were financial guarantees.
