Credit Event

Any sudden and tangible (negative) change in a borrower's credit standing or decline in credit rating. A credit event brings into question the borrower's ability to repay its debt. It is the defining trigger in a credit derivative contract, or credit default swap. If the borrower experiences a credit event, then the buyer of the contract must pay the seller an agreed-upon sum to cover the loss.

Credit events include bankruptcies or violating a bond indenture or other loan agreement. Any decline in the borrower's credit rating can trigger the swap. Credit events always refer to the condition of the borrower pertaining to the underlying asset and not to either the lender or the purchaser of the swap.


Investment dictionary. . 2012.

Look at other dictionaries:

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  • credit event — noun A significant default on a financial instrument or some other financial occurrence, such as bankruptcy, restructuring, repudiation, or moratorium, or failure to pay some other obligation, such as taxes …   Wiktionary

  • credit default swap — A contract between a credit protection seller (seller) and a credit protection buyer (buyer) where, in consideration of the buyer paying the seller an agreed fee, the seller agrees to pay out agreed sums to the buyer if certain credit events… …   Law dictionary

  • credit protection seller — USA credit protection seller, Also known as the protection seller. The entity (usually a financial institution, fund or insurer) that is obligated to make certain payments under a credit default swap to its counterparty, the credit protection… …   Law dictionary

  • credit protection buyer — USA credit protection buyer, Also known as the protection buyer. An entity (usually a financial institution or fund) that is entitled to receive certain payments under a credit default swap from its counterparty, the credit protection seller,… …   Law dictionary

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  • credit swap — A type of credit derivative instrument. Swap contracts in which one party makes payments only if a specified credit event occurs. In a credit default swap, the protection seller agrees, for an upfront or periodic fee, to compensate the protection …   Financial and business terms

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