Credit default swap (CDS) - Financial definition
Financial acronyms
The entire acronym collection of this site is now also available offline with this new app for iPhone and iPad.
Concise definition of the term credit default swap
A credit default swap is a contract in which one party (the protection seller) agrees to receive periodic payments in return for making a contingent payment to the protection buyer, following a credit event (downgrade, default) on a specific security or loan.
Comprehensive definition of the term credit default swap
A credit default event would normally cover payment default, bankruptcy and rescheduling/restructuring of debt. It must be a material and objectively measurable default. In particular, note that ratings downgrades are not in themselves evidence of default.