Credit event

Credit event

A credit event is the financial term used to describe either:

  • A general default event related to a legal entity's previously agreed financial obligation. In this case, a legal entity fails to meet its obligation on any significant financial transaction (coupon on a bond it issued or interest rate payment on a swap for example). The marketplace will recognize this as an event related to the legal entity's credit worthiness.
  • A financial event related to a legal entity which triggers specific protection provided by a credit derivative (credit default swap, credit default swap index, credit default swap index tranche, etc.)

The events triggering a credit derivative are defined in a bilateral swap confirmation which is a transactional document that typically refers to an ISDA master agreement previously executed between the two swap counterparties. There are several standard credit events which are typically referred to in credit derivative transactions:


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Look at other dictionaries:

  • credit event — USA An event or circumstance specified in a credit default swap confirmation which obligates the credit protection seller to make certain payments to the credit protection buyer. The credit events most commonly specified are failure of the… …   Law dictionary

  • Credit Event — Any sudden and tangible (negative) change in a borrower s credit standing or decline in credit rating. A credit event brings into question the borrower s ability to repay its debt. It is the defining trigger in a credit derivative contract, or… …   Investment dictionary

  • credit event — A term used in credit swap and some other credit related contracts. The specified credit event in each contract is defined by the parties to suit their particular needs. Typical specified credit events are bankruptcy, insolvency, credit rating… …   Financial and business terms

  • credit event — noun A significant default on a financial instrument or some other financial occurrence, such as bankruptcy, restructuring, repudiation, or moratorium, or failure to pay some other obligation, such as taxes …   Wiktionary

  • credit default swap — A contract between a credit protection seller (seller) and a credit protection buyer (buyer) where, in consideration of the buyer paying the seller an agreed fee, the seller agrees to pay out agreed sums to the buyer if certain credit events… …   Law dictionary

  • credit protection seller — USA credit protection seller, Also known as the protection seller. The entity (usually a financial institution, fund or insurer) that is obligated to make certain payments under a credit default swap to its counterparty, the credit protection… …   Law dictionary

  • credit protection buyer — USA credit protection buyer, Also known as the protection buyer. An entity (usually a financial institution or fund) that is entitled to receive certain payments under a credit default swap from its counterparty, the credit protection seller,… …   Law dictionary

  • Credit default swap — If the reference bond performs without default, the protection buyer pays quarterly payments to the seller until maturity …   Wikipedia

  • Credit derivative — In finance, a credit derivative is a securitized derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset. In this way, the credit risk is on an entity other than the counterparties to the… …   Wikipedia

  • credit swap — A type of credit derivative instrument. Swap contracts in which one party makes payments only if a specified credit event occurs. In a credit default swap, the protection seller agrees, for an upfront or periodic fee, to compensate the protection …   Financial and business terms

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