Credit default swap

• Credit default swap - Wikipedia, the free encyclopedia

  • A credit default swap (CDS) can almost be thought of as a form of insurance. If a borrower of money does not repay his loan, he "defaults." If a lender has purchased a CDS on that loan from an insurance company, the lender can then use the default as a credit to swap it in exchange for a repayment from an insurance company
  • A credit default swap (CDS) can almost be thought of as a form of insurance. If a borrower of money does not repay her loan, she "defaults." If a lender has purchased a CDS on that loan from an insurance company, the lender can then use the default as a credit to swap it in exchange for a repayment from an insurance company
  • A credit default swap (CDS) is often referred to as a form of insurance that protects a lender if a borrower of capital defaults on a loan. When a lender purchases a CDS from an insurance company, the liability of the loan becomes a credit that may be swapped for cash upon the loan defaulting
  • The difference between a traditional insurance policy and a CDS is that anyone can purchases one, even those who have no direct interest in the loan being repaid. This type of investor is commonly referred to as a speculator.
  • A credit default swap (CDS) is a form of insurance that protects the buyer of the CDS in the case of a loan default. If the borrower defaults (fails to repay the loan), the lender who has bought traditional insurance can exchange or "swap" the defaulted loan instrument (and with it the right to recover the default at some later time) for money - usually the face value of the loan