Loan Credit Default Swap (LCDS)

Dictionary Says

Definition of 'Loan Credit Default Swap (LCDS)'


A type of credit derivative in which the credit exposure of an underlying loan is swapped between two parties. A loan credit default swap's structure is the same as a regular credit default swap, except that the underlying reference entity is limited strictly to syndicated secured loans, rather than any loan or bond.

Also know as a "loan-only credit default swap".

Investopedia Says

Investopedia explains 'Loan Credit Default Swap (LCDS)'


As with regular CDS, these derivatives can be used to hedge against credit exposure the buyer may have or to obtain credit exposure for the seller. These products can also be used to make bets on the credit quality of an underlying entity to which parties have not had previous exposure. It is important to understand why LCDS are broken out separately from CDS. The fact that the reference loans are secured leads to higher recovery values if those loans default. As a result, LCDS generally trade at tighter spreads.

comments powered by Disqus
Hot Definitions
  1. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  2. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
Trading Center