Credit Derivatives: Basics
Interactive

Credit Derivatives: Basics

Intuition Publishing
Updated Sep 23, 2020

Credit derivatives, in particular Credit Default Swaps (CDS), received much publicity during the global financial crisis for their perceived negative effects on the global economy, but are simply a way of trading credit risk. We explain the terminology associated with a CDS, and give an example of a typical CDS transaction. We then define what constitutes a credit event, and demonstrate how CDS transactions are settled.