Credit Default Swaps: The Vanilla Essence
First published:
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Foreword
Stephen Bartlett
Foreword
Foreword
Preface
A credit default swap snapshot
Parties and key players
Documentation and standard trading conventions
Credit risk period, scheduled termination date and termination date
Fixed amounts, floating rate payer calculation amount and initial payment amount
Qualifying guarantee and qualifying affiliate guarantee
Reference obligation
Subordination and the senior non-preferred supplement
Outstanding principal balance and due and payable amount
Obligations and deliverable obligations
Credit event overview
Bankruptcy
Failure to pay
Repudiation/moratorium
Restructuring and redenomination
Governmental intervention and contingent convertible capital instruments
Successor determinations
Publicly available information and eligible information
Notices
Business day terms and timing rules
Event determination date and settlement methods
Auction settlement
Cash settlement
Physical settlement
Physical settlement fallback procedures
Orphaning
Fixed recovery transaction and reference obligation only trade
Novation and early termination
Economic sanctions: compliance challenges
Disclosures and regulations
Conclusion: at the ‘Exit Checkpoint’
Appendix
References
When we embark on an expedition, many questions are likely to have been formulated, others are in the process of being formulated and many have not even been contemplated. During the expedition, in an attempt to answer a question – or perhaps to carry out a meticulous excavation in order to answer the question in a way that others have yet to attempt, let alone publish – we can most likely merely scratch the surface. In this book, Indra Rajaratnam formulates questions on the operation of the single-name credit default swap (CDS) and answers them to a degree that the reader will not hesitate to conclude is highly successful, offering a thought-provoking examination as to its significance and flexibility in meeting the needs of today’s financial markets.
The single-name CDS has had an eventful life to date. This book initially takes the reader through its benefits since its infancy in the 1990s, and later addresses present-day trading-related issues with a clarity and thoughtfulness that will appeal to a CDS trader, investor or regulator as well as to a risk, accounting or legal professional.
Some readers will remember the debates in its early years concerning the use of the
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