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Finance Dictionary and Glossary of Investment Terms
Credit Derivative
Definition 1.
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).
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Definition 2.
A contract between two parties that allows for the use of a derivative instrument to transfer credit risk from one party to another. The party transferring risk away has to pay a fee to the party that will take the risk.
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