A basket default swap whereby a payout by the protection seller is triggered only following a second default from among the reference entities. Assuming there are four reference entities in a given second-to-default swap, if there is only one reference entity that defaults over the life of the swap, no payment need to be made. However, if a second reference entity defaults during the swap’s term, there will be a payout by the protection seller. After that payment is made, the swap terminates and the protection seller doesn’t need to pay out for a default that may occur for the two remaining reference entities.