Basket credit default swap

Definition:

A credit derivative contract that provides a payoff when any of the multiple reference entities default. The contract specifies the number of defaults after which the payoff is generated, based on which the instrument is classified as first-to-default CDS, second-to-default CDS or more generally nth-to-default CDS.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Liquid

In context of securities, easily traded or converted to cash. In context of a corporation, the state of having enough cash and cash equivalents to cover short-term obligations.

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