Credit default swapsSingle-name, portfolio, and indexes
Credit default swaps (CDSs) are contracts that are available in the dealer markets for either assuming or reducing the credit risk exposure associated with one or more obligors (names). This chapter contains an analysis of CDSs and their applications in risk management. It describes CDS contracts and the evolution of documentation concerning admissible credit events covered by the contract. In addition, the evolution of indexes and CDX contracts are described. The valuation principles are outlined, and the need for better back-office systems, marking to market, and clearinghouse safeguards are stressed.
18.1 Credit Default Swaps
Credit derivatives are typically bilateral ...