Definition

Credit Derivatives

Credit derivatives are financial contacts that are designed to protect a bank or other lending institutions against loss due to defaults on its loan or security holdings. This helps financial institutes like banks to reduce their credit risk exposure and in some cases interest risk exposure as well. Credit derivatives may be like credit swap, credit option, credit default swap etc.


Credit derivatives is the financial contracts that are designed to protect a bank or other lending institution against loss due to defaults on its loans or security holdings.

Share it:  Cite

More from this Section

  • Co-operative Banks
    Co-operative banks usually meet the short-term credit needs of agriculture. Since agriculture ...
  • Asset utilization
    Asset utilization is the ratio of a bank’s total operating revenues to its total assets, ...
  • Long position
    Long position refers to a position in which foreign currency assets exceed foreign currency ...
  • Main / Spread
    Main / Spread is the difference between the buying and selling rates of a foreign exchange ...
  • Matched sale-purchase transaction
    Matched sale-purchase transaction is an arrangement whereby the Fed sells securities and ...