What are credit derivatives?

A credit derivative is an over-the-counter bilateral transaction whereby the lender transfers the risk that a loan will not be repaid to another party.

This guidance note details what a credit derivative is and explains the types of funded and unfunded credit derivatives and how they work. It provides the rationale for using a credit derivative and how they are documented. It also considers what a constitutes a default ie a credit event, under a credit derivative and how they are settled.

Finally how credit derivatives are cleared in Europe.

See What are credit derivatives?