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Self-Referenced Credit Derivative


A credit derivative in which one of the counterparties is the reference entity itself. It involves the transfer of credit risk associated with a specified reference entity, with the reference entity being one of the counterparties to the contract. Under such a credit derivative contract, a counterparty’s right to the full repayment of a sum paid prior to its insolvency is contingent on it remaining solvent. Companies enter into self-referenced credit derivatives transactions for multiple reasons, including regulatory arbitrage.

Examples of self-referenced credit derivatives include self-referenced swaps, self-referenced credit-linked notes, etc.



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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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