Reference obligation

Indra Rajaratnam


This chapter focuses on the role of a “reference obligation” in the context of a CDS transaction. It begins by exploring the importance of a reference obligation, and the risks associated with the use of a “nonstandard reference obligation”. The background to the development of the “standard reference obligation” (SRO) framework and the way in which the framework mitigates the risks connected with the use of a non-standard reference obligation are also examined. Then, a description of the term “reference obligation”, and the features of both an SRO and a non-standard reference obligation are elaborated. Recommended practices relating to the selection of a non-standard reference obligation are also briefly outlined and, at the end of the chapter, substitution events and the prescriptive rules relating to the substitute reference obligation selection process are examined.


A reference obligation is an important feature within the anatomy of the product. It constitutes an Obligation for the purposes of a trigger obligation in relation to a credit event. It also comprises a Deliverable Obligation for the purposes

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