What is Credit default swap (CDS) in FRM Part 1?

A contract in which the protection buyer pays a premium and the protection seller compensates specified loss after a credit event. The approximate par spread is hazard rate times one minus recovery under simplifying assumptions.

Credit default swap (CDS)

FRM Part 1 glossary · Valuation And Risk Models

Definition

A contract in which the protection buyer pays a premium and the protection seller compensates specified loss after a credit event.

Credit default swap (CDS) in plain English

The approximate par spread is hazard rate times one minus recovery under simplifying assumptions.

Also called: CDS

Learn these first

Credit risk
Counterparty credit risk

Related FRM Part 1 terms

Backtesting
Basis
Basis point
Binomial option pricing model
Black-Scholes-Merton model
Coherent risk measure
Component VaR
Convexity
Delta
Duration (modified)

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