Credit default swap - Definition and Overview

The Credit default swap (CDS) is the most widely used credit derivative. It is an agreement between a protection buyer and a protection seller whereby the buyer pays a periodic fee in return for a contingent payment by the seller upon a credit event (such as a certain default (finance)) happening in the reference entity.

Levels and flows

The Bank for International Settlements reported the notinal amount on outstanding credit forwards and swaps to be $3.846 trillion in end-June 2004, up from $536 billion at the end of June 2001.

The Office of the Comptroller of the Currency reported the notional amount on outstanding credit derivatives from 667 reporting banks to be $1.909 trillion.

See also

• Credit derivative

External links

Reporting

• BIS - Regular Publications (http://www.bis.org/publ/regpubl.htm)
• OCC - Quarterly Derivatives Fact Sheet (http://www.occ.treas.gov/deriv/deriv.htm)