A credit default swap is a derivative that:

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A credit default swap is a contract between two parties in which one party (the protection buyer) pays the other party (the protection seller) a fee upfront or on a regular basis. In return, the protection seller agrees to compensate the protection buyer in the event that a particular debt security (usually a bond) experiences a default or other credit event. The protection seller essentially takes on the risk of default in exchange for a fee, which is why a credit default swap is considered a type of insurance contract. It does not require an asset to be delivered, allows trading of security or provide loans to firms.

A Credit Default Swap Is a Derivative That