A pure credit swap

Question

A pure credit swap

Quizplus · Accepted Answer

A pure credit swap is like buying credit insurance because it provides protection against the risk of default by a reference entity. It is also like buying a multi-period credit option because it gives the buyer the right, but not the obligation, to sell the reference entity's credit risk to the seller at a specified price. Finally, a pure credit swap eliminates the interest rate risk contained in a total return swap because it does not involve the exchange of interest payments.

A Pure Credit Swap