Business and Personal Finance Dictionary

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• CREDIT DEFAULT SWAP
  
  A Swap in which A pays B the periodic fee, and B pays A the floating payment that depends on whether a predefined credit even has occurred, or not. The fee might be quarterly, semiannual, or annual. The floating payment would likely occur only once, and might be proportional to the discount of the reference loan below par. The credit event might be a declaration of bankruptcy or violation of a bond indenture or loan agreement.
  
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