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Postby » Thu Nov 06, 2014 7:08 am

can anybody explain CCDS to me... to my understanding its like CDS but it cover large type of derivative and it replaces any one which is defaulf..please correct me if i am wrong

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Postby edupristine » Thu Nov 06, 2014 10:20 am

A CCDS is a credit default swap (CDS) in which the notional and the amount of protection are not fixed, but rather linked to a benchmark. Here, the protection amount is based on the positive present value of a reference transaction (an OTC derivatives instrument).

This type of CDSs can be viewed as an OTC derivative in which is embedded a knock-in option upon the default of the reference transaction. In a regular CDS, protection payment is triggered by a credit event, such as non-performance, i.e., failure by a reference entity to honor obligations.

In a contingent credit default swap, the trigger is contingent on the occurrence of both a credit event and some specified event such as the level of a particular market or sector variable.

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