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Derivatives




Funded Credit Derivative


credit derivative in which the investor, that is, the credit protection seller, makes an upfront payment to the credit protection buyer when the latter buys the protection instrument. In effect, the protection seller makes the credit insurance payment upfront and must secure the cash (funds) needed at the beginning of the transaction. A typical example of a funded credit derivative is a credit-linked note (CLN).



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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