{"id":360321,"date":"2026-04-08T17:30:32","date_gmt":"2026-04-08T12:00:32","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=360321"},"modified":"2026-04-08T17:30:32","modified_gmt":"2026-04-08T12:00:32","slug":"credit-default-swaps-cds","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/credit-default-swaps-cds\/","title":{"rendered":"Credit Default Swaps (CDS)"},"content":{"rendered":"<p><strong>News<\/strong>: RBI kept FPI investment limits unchanged and fixed CDS sale limit at 5% of outstanding corporate bonds for 2026-27.<\/p>\n<h2>About Credit Default Swaps (CDS)<\/h2>\n<figure id=\"attachment_360328\" aria-describedby=\"caption-attachment-360328\" style=\"width: 371px\" class=\"wp-caption aligncenter\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\" wp-image-360328\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-Investopedia.jpg?resize=371%2C229&#038;ssl=1\" alt=\"Credit Default Swaps (CDS)\" width=\"371\" height=\"229\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-Investopedia.jpg?resize=300%2C185&amp;ssl=1 300w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-Investopedia.jpg?resize=1024%2C630&amp;ssl=1 1024w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-Investopedia.jpg?resize=768%2C473&amp;ssl=1 768w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/04\/Source-Investopedia.jpg?w=1284&amp;ssl=1 1284w\" sizes=\"auto, (max-width: 371px) 100vw, 371px\" \/><figcaption id=\"caption-attachment-360328\" class=\"wp-caption-text\">Source &#8211; Investopedia<\/figcaption><\/figure>\n<ul>\n<li><strong>Credit Default Swaps (CDS)<\/strong> is a <strong>financial derivative<\/strong> that allows investors to transfer or offset credit risk of a debt instrument.<\/li>\n<li><strong>Key Components of a CDS:<\/strong>\n<ul>\n<li><strong>Parties<\/strong>: CDS involves a <strong>protection buyer<\/strong> and <strong>protection seller,<\/strong> where <strong>risk transfer takes place between them.<\/strong><\/li>\n<li><strong>Premium Payment:<\/strong> The buyer pays regular premiums similar to insurance payments to the seller.<\/li>\n<li><strong>Compensation Mechanism:<\/strong> The seller agrees to pay the value and interest if a credit event like default or bankruptcy occurs.<\/li>\n<li><strong>Underlying Reference:<\/strong> It is linked to a specific credit entity or credit instrument on which the risk of default is based.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Uses of Credit Default Swaps:<\/strong>\n<ul>\n<li><strong>Risk Hedging:<\/strong> It is used to protect against default risk of a credit instrument.<\/li>\n<li><strong>Speculation<\/strong>: It allows investors to bet on the creditworthiness of an entity.<\/li>\n<li><strong>Arbitrage<\/strong>: It helps in exploiting price differences in credit markets.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Risks<\/strong>:\n<ul>\n<li><strong>Counterparty Risk:<\/strong> The CDS seller may itself default, causing loss of protection.<\/li>\n<li><strong>Premium Loss:<\/strong> The buyer may lose premiums paid if the seller fails.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>News: RBI kept FPI investment limits unchanged and fixed CDS sale limit at 5% of outstanding corporate bonds for 2026-27. About Credit Default Swaps (CDS) Credit Default Swaps (CDS) is a financial derivative that allows investors to transfer or offset credit risk of a debt instrument. Key Components of a CDS: Parties: CDS involves a&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/credit-default-swaps-cds\/\">Continue reading <span class=\"screen-reader-text\">Credit Default Swaps (CDS)<\/span><\/a><\/p>\n","protected":false},"author":10401,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,12039],"tags":[11872],"class_list":["post-360321","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-knolls","tag-9pm-daily-factly","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/360321","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10401"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=360321"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/360321\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=360321"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=360321"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=360321"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}