A swap in which a fixed recovery rate is exchanged for a real recovery rate following a credit default. This swap usually trades only on credits that are approaching default. It is usually traded as a zero-premium credit default swap (CDS) where the reference price is set at the fixed recovery rate, rather than 100.
Derivatives
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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