FLCDS

It stands for first-loss credit default swap; a credit default swap (CDS) that protects its buyer (the long) from losses of a reference asset/ reference entity or a pool of reference assets/reference entities following a predefined credit event (s). The buyer of the swap will be compensated by the seller (the short) when the credit event occurs, triggering performance on the swap seller. In return for the right to receive compensation, the buyer pays premium amounts on a preset periodical basis or alternatively a lump sum amount or both methods of payment until the swap gets terminated as agreed by the two parties in the swap agreement.

A first-loss credit default swap compensates its buyer for any losses associated with credit events up to a specific portion of the total notional of the asset pool.