Definition of credit derivative in US English:

credit derivative


  • A type of derivative in which the risk that a loan will not be repaid is sold to a party other than the lender.

    ‘credit derivatives act as insurance for a company that invests in a corporate bond or loan’
    • ‘Credit derivatives depend on the credit worthiness of a company.’
    • ‘Banks have also pulled in profits in side businesses such as credit derivatives and settling trades for hedge funds.’
    • ‘Anxiety is high: Big losses in credit derivatives could set off a chain reaction.’
    • ‘Credit derivatives are a major accident in the making.’
    • ‘Other application areas are credit derivatives where the payoff is linked to the spread.’