Credit Event

Posted in Finance, Accounting and Economics Terms, Total Reads: 474

Definition: Credit Event

Credit Event occurs when an organisations defaults/fails to meet a significant transaction.

For example, bankruptcy, failure to pay, restructuring, repudiation, obligation default etc. are all credit events. This affects the credit worthiness and thus these events trigger protections that are provided by credit derivatives like Credit Default Swap, Credit Default Swap Index, Credit Default Swap Index tranche etc.

Any other event that triggers a tangible negative change in a borrower’s credit is a credit event as it triggers credit derivatives. It is always in reference to the position of the borrower with respect to the underlying asset and not to the lender/purchaser of swap.


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