credit derivative

Contractual arrangements that allow one party to transfer credit risk of a reference asset, which it may or may not own, to one or more counterparties. The first party may be called the " protection buyer", the " beneficiary" or the " originator". The counterparty or counterparties may be called the "protection seller" or the " guarantor". Credit derivatives are contracts for transferring risk - just like foreign exchange, commodity and interest rate risk derivatives. The only difference is the type of risk transferred.
See total return swaps, credit default swaps, credit linked note and credit options for definitions of specific types of credit derivative instruments.
Also see reference asset. American Banker Glossary

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credit derivative UK US noun [C]
FINANCE a financial product similar to an insurance agreement, in which the buyer pays the seller regular amounts for the right to get money back if a particular loan, bond, etc. is not paid back

Financial and business terms. 2012.

Look at other dictionaries:

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  • credit default swap — A contract between a credit protection seller (seller) and a credit protection buyer (buyer) where, in consideration of the buyer paying the seller an agreed fee, the seller agrees to pay out agreed sums to the buyer if certain credit events… …   Law dictionary

  • credit default spread — USA credit default spread, Also known as a credit default swap spread or a credit spread (or sometimes, simply, the spread). In derivatives, an amount, typically specified in basis points, above LIBOR that a …   Law dictionary

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