Derivatives Credit Default Swaps
Derivatives Credit Default Swaps are financial instruments that allow investors to hedge against the risk of default on a particular debt obligation. In a credit default swap, the buyer makes payments to the seller in exchange for protection against the default of a specified entity or financial instrument. If the entity defaults on its obligation, the seller is required to compensate the buyer for the loss incurred. These derivatives are commonly used by investors to manage credit risk and speculate on the creditworthiness of a particular entity.