Credit derivative - Financial definition
Financial acronyms
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Concise definition of the term credit derivative
A credit derivative is a derivative where the value and/or return depends on a set of risk factors related to credit quality or rating of one or more underlying reference credits.
Comprehensive definition of the term credit derivative
The purpose of credit derivatives is to be able to isolate the credit risk of a borrower, or a pool of borrowers, and then transfer it to an entity, or a group of entities, other than the lender(s).
Some examples of credit derivatives would be: