Credit default swap

Credit default swap

A credit default swap (CDS) is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default. Generally, the agreement is that in the event of default the buyer of the CDS receives money (usually the face value of the loan), and the seller of the CDS receives the defaulted loan (and with it the right to recover the loan at some later time).

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Part of Speech: noun
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Industry/Domain: Financial services
Category: Stocks & securities
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Related terms

Credit Default Swap

Banking; Investment banking

Abbr.: CDS. Credit derivative under the terms of which one counterparty pledges to take on the other's future loan losses in exchange for the payment of a premium.

credit default swap

Financial services; Stocks & securities

A credit default swap (CDS) is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default. ...

Credit Default Swap

Financial services; Personal investment management

A swap designed to transfer the credit exposure of fixed income products between parties. A credit default swap is also referred to as a credit derivative contract, where the ...

credit default swap

Financial services; Commodity exchange

A bilateral over-the-counter (OTC) contract in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or ...

above par

Financial services; Stocks &securities

If bonds are re-sold on the secondary market, and if interest rates are lower that the bond's coupon rate, the bond will be sold at a premium, or above par.

P/E ratio

Financial services; Stocks &securities

The ratio of a company's current price per share and average earnings per share. The former is divided by the latter. A high ratio suggests high growth potential in the future.