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Credit Default Swaps - What is a credit event?

Bankruptcy – i.e. official/legal filing

Failure to pay – usually subject to a threshold

Restructuring

Under ISDA definitions there are 4 standard options

Full Restructuring

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Reduction in interest or principal

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Delay in interest payments

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Extension of maturity

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Subordination of reference obligation

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Restructuring as a result of credit deterioration

Modified Restructuring

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As above BUT deliverable obligation limited to a maximum maturity, and must be fully transferable

Credit Derivative Instruments

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