| Credit
Derivative |
 |
Privately held negotiable bilateral contracts that allow users to
manage their exposure to credit risk. Credit Derivatives are financial
assets like forward contracts, swaps and options for which the price
is driven by the credit risk of economic agents (private investors
or governments).
|
 |
For
example, a bank concerned that one of its customers may not be able
to repay a loan can protect itself against loss by transferring the
credit risk to another party while keeping the loan on its books.
|
|
|
|
|
Dictionary
