Credit Derivative Products
This chapter provides an overview of the characteristics, terms, and concepts associated with credit derivative transactions. It is hoped that the information in this chapter will help the reader who is new to credit derivatives more easily understand the applications described in the rest of this book.
Credit Derivative Defined
A commonly used definition of a credit derivative is: A financial contract where the value is derived from an underlying market value incorporating credit risk.
This definition is somewhat problematical in that it could be interpreted to encompass bond options, a product that has been around a long time and is usually not considered a credit derivative, or it could ...