Risk glossary


Credit default swap (CDS)

A credit default swap is a type of swap designed to transfer the credit exposure of fixed-income products. It can reference either a single name or an index of names. For the duration of the contract, the credit protection buyer makes payments to the swap’s seller up until the maturity date of a contract. In return, the seller agrees to compensate the buyer for losses on covered products emanating from a credit event, as well as all interest payments that would have been paid had the security reached its maturity date.

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