Notices

Credit derivative

From Traderpedia

Definition:
A credit derivative is a contract, future or option, to transfer the risk of the total return on a credit asset falling below an agreed level


A credit derivative is a contract (derivative) to transfer the risk of the total return on a credit asset falling below an agreed level, without transfer of the underlying asset. This is usually achieved by transferring risk on a credit reference asset. Early forms of credit derivative were financial guarantees. Some common forms of credit derivatives are credit default swap, total return swap and credit linked note.