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Multi-Name and Index CDSs

  • Christopher L. Culp
  • Andria van der Merwe
  • Bettina J. Stärkle
Chapter
Part of the Palgrave Studies in Risk and Insurance book series (PSRIIN)

Abstract

Credit default swaps (“CDSs”) based on more than one reference entity include bespoke portfolio CDSs with customized reference portfolios, basket CDSs with individualized reference portfolios and engineered payoffs (e.g., Nth-to-default CDSs and excess-of-loss CDSs) designed to reduce the cost of credit protection while tailoring such protection to the particular needs of protection purchasers, index CDSs based on a standardized set of underlying reference entities, and tranched index CDSs based on both a standardized set of underlying reference entities and pre-defined cumulative loss rates. The mechanics of these types of multi-name CDSs are summarized here.

KEYWORDS

Multi-name credit default swap Multi-name CDS Index CDS Portfolio CDS Basket CDS Tranched index CDS CDX LCDX, LevX iTraxx Nth-to-default swap Excess-of-loss swap XOL swap 

References

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  2. Culp, C.L. 2006. Structured Finance and Insurance. Hoboken, NJ: Wiley.Google Scholar
  3. Culp, C.L., and A.M.P. Neves. 1998a. Credit and Interest Rate Risk in the Business of Banking. Derivatives Quarterly 4 (4) (Summer).Google Scholar
  4. Culp, C.L., and A.M.P. Neves. 1998b. Financial Innovations in Leveraged Commercial Loan Markets. Journal of Applied Corporate Finance 11 (2) (Summer).Google Scholar
  5. Lucas, D., and A. Thomas. 2003. Nth to Default Swaps and Notes: All About Default Correlation. In Credit Derivatives: The Definitive Guide, ed. J. Gregory. London: Risk Books.Google Scholar
  6. O’Kane, D., et al. 2003. Guide to Exotic Credit Derivatives. Lehman Brothers.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Christopher L. Culp
    • 1
  • Andria van der Merwe
    • 1
  • Bettina J. Stärkle
    • 2
  1. 1.Johns Hopkins UniversityBaltimoreUSA
  2. 2.Compass LexeconChicagoUSA

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