Covering your credit risk
Credit derivatives may send shivers down the spines of some, but really they are nothing to be afraid of, as Markit's Tom McNerney and Penny Davenport explain
A credit default swap (CDS) is a contract where one party (the credit protection buyer) pays the other (the credit protection seller) a fixed periodic coupon for the life of the contract.
The party paying the premium is effectively buying insurance against specific credit events on an agreed reference entity. Credit events are usually defined to include default, bankruptcy or debt restructuring for
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