A credit default swap that relates to the credit relationship with only one debtor. – Here, the protection buyer transfers the reference asset, such as bonds or book credits, to the protection seller (fixed rate payer) in return. If the settlement takes place by means of a delivery of securities (physical settlement: the market standard), the secured party generally has a choice between securities of the same type (cheapest-to-deliver option). However, it is also possible to agree on a settlement payment equal to the difference between the nominal value of the reference asset and the market value after the occurrence of the credit event (cash settlement). This is particularly the case when the CDS is used to hedge a loan portfolio from which it is difficult to separate out individual loans. At the beginning of 2005, single-name CDS accounted for just over fifty percent of the global credit derivatives market. – See Derivatives Transactions-Clearing Obligation, Derivatives Transactions-Reporting Obligation, Credit Derivative. – Cf. Deutsche Bundesbank Monthly Report of December 2004, p. 44 f.
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