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Basket credit default swap
A multi-name credit default swap which covers a pool of reference assets belonging to various entities rather than a single asset, and in which the protection seller agrees to compensate the buyer for a loss resulting from the occurrence of a credit event with respect to one of the assets in the reference basket, thus terminating the swap.
Basket credit default swaps may take various forms. In a first-to-default or FTD, the protection seller agrees to compensate the buyer for the loss incurred as soon as a credit event occurs with respect to one of the assets in the reference portfolio, thus terminating the swap. In the same way, in a second-to-default and a nth-to-default, the protection seller agrees to compensate the buyer for the loss incurred, not after the first credit event(s), but after the second or nth event, thus terminating the swap.
Translations
Synonyms and variations
- Basket CDS
- Basket default swap
- First-to-default
- FTD
- Nth-to-default
- Second-to-default