CREDIT DERIVATIVE
credit derivative: translation
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]
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