With respect to a credit derivative (e.g., a credit default swap), a name implies a borrower or reference entity or reference obligation. In other words, it the underlying credit risk factor (simply, a credit) that the protection buyer seeks to get protection from. To that end, the protection buyer pays a premium to the protection seller against “protection/ insurance” from default by the borrower (reference entity or reference obligation) in the event the reference entity/ asset encounters a credit event triggering default over the course of a contract’s lifespan.

Credit derivatives many involve only one name (single-name credit derivatives) or more (multi-name credit derivatives). For example, a multi-name credit default swap provides protection for a combination of credits (names), rather than a single credit (single name: single-name CDS). A multi-name is an insurance on a reference portfolio of a number of entities with equal or unequal weight so that the portfolio’s total notional amount is equal to one. The protection buyer pays a regular premium that is proportional to the current notional amount of the swap.