Definition of a Credit Default Swap (CDS)
An OTC contract designed to transfer the credit exposure of fixed income products between parties. The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. In a CDS the risk of default is transferred from the holder of the fixed income security to the seller of the swap. Most credit derivatives take the form of credit default swaps.
For more definitions see our quick guide to OTC derivatives terminology see our glossary
