A forward contract whose underlying is a credit default swap (CDS). It is a contract to take a buyer’s position or a seller’s position on a given CDS at a specified spread at some future date. In other words, it is an obligation that both parties to a forward contract agree today to enter a CDS contract on a predetermined future date for a spread known as the forward spread.

This contract provides a tool for locking in the credit spread on a future credit position. In practice, a CDS differs from a CDS forward in that the former starts immediately and covers the protection buyer up to its maturity, while the latter starts on a future date and protects the holder over the time period from that future date to the CDS maturity date.