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Derivatives

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  • May 6, 2022
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Credit Default Option

A put option in which a payoff is made in the event the issuer of a specified reference asset such as a bond defaults. Differently stated, the option’s payoff is linked to the creditworthiness or payment performance of the underlying reference asset during the life of the option. The credit default option belongs to the class of credit default contracts (which includes credit default basket options, credit default swaps, credit default index contracts, among others).

This option is also known as default option.


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