What is Credit Default Swap (CDS)?

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A Credit Default Swap (CDS) is a financial derivative contract between two parties—a protection buyer and a protection seller—where the buyer makes periodic payments to the seller in exchange for a payoff if a specified third-party debt issuer, known as the reference entity, defaults on its obligations. This over-the-counter (OTC) instrument functions essentially as an insurance policy against credit risk, allowing investors to hedge against potential losses on bonds, loans, or other debt instruments without directly owning the underlying asset.

Credit Default Swap (CDS)

What is Credit Default Swap (CDS)?

What is a Credit Default Swap (CDS) and how does the mechanism of credit risk transfer operate between the buyer and seller?

How do Credit Default Swaps (CDS) relate to the pricing and risk management of Treasury securities, corporate bonds, and Repurchase Agreements (Repos)?

What is the role of Credit Default Swaps (CDS) in the emerging landscape of Real-World Asset (RWA) Tokenization and decentralized finance (DeFi)?

How did the Credit Default Swap (CDS) market contribute to the 2008 financial crisis, and what major regulatory reforms were implemented to mitigate future systemic risk?

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