A credit default swap (CDS) that automatically terminates with one counterparty of which having to make no further payments if the other counterparty gets into default. In other words, the trade is knocked-out with a zero-recovery or rebate if either party defaults regardless of who is with net credit (in the money). Accordingly, this swap provides an alternative to posting or requiring collateral.

A zero-recovery swap is a type of credit extinguishers.