CREDIT SWAP
credit swap: translation
A type of credit derivative instrument. Swap contracts in which one party makes payments only if a specified credit event occurs. In a credit default swap, the protection seller agrees, for an upfront or periodic fee, to compensate the protection buyer upon the happening of the specified credit event. Credit default swaps are similar to a traditional financial guarantees but more flexible. It is more flexible because a credit swap need not be limited to compensation upon an actual default. The specified credit event in each swap is defined by the parties to suit their particular needs. Variations of the basic structure outlined in this definition are also used.
Also known as default swaps or credit default swaps.
See credit derivative, credit event and reference asset. American Banker Glossary
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credit swap UK US noun [C] FINANCE
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