Credit derivatives — credit events

A credit derivative aims to give the purchaser protection against the occurrence of a number of different credit events occurring on the underlying reference entity to that transaction. What a credit event is and the types of credit events that can occur are set out in the 2014 ISDA Credit Derivatives Definitions. They are:

• • Bankruptcy;
• • Obligation Acceleration;
• • Obligation Default
• • Failure to Pay;
• • Repudiation/Moratorium;
• • Restructuring; and
• • Governmental Intervention.

This guidance note describes each of the seven credit events and shows which credit event applies to each transaction type. Additionally, the guidance note considers the two types of obligations that need to be understood when a credit event occurs. They are:

• • Reference obligations; and
• • Deliverable obligations.

ISDA’s 2019 Narrowly Tailored Credit Event Supplement which contains amendments to the 2014 ISDA Credit Derivatives Definitions is discussed.

See Credit derivatives — credit events.