Credit Derivative

What Does Credit Derivative Mean?
Privately held negotiable bilateral contracts that allow users to manage their exposure to credit risk. Credit derivatives are financial assets like forward contracts, swaps, and options for which the price is driven by the credit risk of economic agents (private investors or governments).

Investopedia explains Credit Derivative
For example, a bank concerned that one of its customers may not be able to repay a loan can protect itself against loss by transferring the credit risk to another party while keeping the loan on its books.

Related Terms

Credit
Credit Default Insurance
Credit Linked Note - CLN
Default Risk
Derivative
Equity Derivative
iTraxx
Longevity Derivatives
Reference Asset
Weighted Average Rating Factor - WARF
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