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Derivatives

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  • August 7, 2020
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Long CDS

Buying a credit default swap (CDS); a long position in a credit default swap (CDS). It is equivalent to shorting credit risk, i.e., having a short exposure on the credit market (bond/ loan market). This is the position taken by a protection buyer whereby the buyer shorts the credit and pays the periodical premiums (CDS price).

By being long a CDS, the buyer or holder the swap gets insurance coverage to the credit risk associated with the underlying credit.


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