Credit Contract Life Cycle
The credit derivatives market is one of the largest and most important segments of the OTC derivatives market. As explained in Chapter 2, the major credit derivatives contract types are the following:
- single-name credit default swap (CDS), which provides protection on a single reference obligation (bond) issued by a particular reference entity
- credit default swap index (CDX), which provides protection on a portfolio of reference entities
- loan credit default swaps (LCDS), which provides protection on a syndicated secured loan
- index tranche, which provides protection from a particular amount of loss on a portfolio of reference entities
Most credit derivatives contracts are OTC contracts, and they include ...