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Credit Default Swaps
Like Digital Bankruptcy Swaps, Credit Default Swaps allow you to buy and sell protection within your credit portfolio as needed.
A Credit Default Swap is a credit derivative contract similar to the Digital Bankruptcy Swap. As in the case of the Digital Bankruptcy Swap, the protection buyer pays a periodic fee to the seller and in return receives a payoff upon the occurrence of a specified credit event.
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| The Credit Default Swap differs from the Digital Bankruptcy Swap in two important ways : |
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The credit events that trigger the contingent payoff, in addition to bankruptcy, extend to failure to pay, obligation acceleration, restructuring and repudiation and/or moratorium. |
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The buyer receives the full notional amount of the contract upon its delivery of a portfolio of bonds and/or loans of the underlying Reference Entity. |
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| Credit Default Swaps are popular with financial institutions, which are sensitive to the incidence of default on loans, bonds or derivatives contracts. In contrast, companies may prefer Digital Bankruptcy Swaps as they need protection specifically against the event of bankruptcy by a debtor.
For a more detailed discussion about Credit Default Swaps and other credit derivatives, please see "Introduction to Credit Derivatives" in the Learn More section. To compare Credit Default Swaps with other risk mitigation products on the market, please see our Product Comparison module in the Interactive Learning section.
If you would like to transact with us, please Contact Us. Or, join EnronOnline™ to trade Digital Bankruptcy Swaps and Credit Default Swaps in real-time.
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