Reference Entity

Filed Under » , , ,
Dictionary Says

Definition of 'Reference Entity'

One of the underlying parties involved in a credit derivative contract. The reference entity bears the credit risk of the contract, and can be a corporation, government or other legal entity that issues debt of any kind. If a credit event such as a default occurs and the reference entity is unable to satisfy the conditions of the bond, the buyer of the credit default swaps receives payment from the seller.
Investopedia Says

Investopedia explains 'Reference Entity'

The reference entity is essentially the party upon which the two counterparties in the transaction are speculating. The seller of the transaction is selling protection against the default of the reference entity. The buyer of the securitized credit derivative believes that there may be a chance that the reference entity will default upon their issued debt and is therefore entering the appropriate position.

Articles Of Interest

  1.

    Careers In The Derivatives Market

    The growing interest in and complexity of these securities means opportunities for job seekers.

  2. The Barnyard Basics Of Derivatives

    This tale of a fictional chicken farm is a great way to learn how derivatives work in the market.

  3. The Alphabet Soup Of Credit Derivative Indexes

    Find out how these instruments work and how they are used in the market.

  4. Mark-To-Market Mayhem

    Did this accounting convention contribute to the credit crisis of 2008? Find out here.

  5. Break Into Forex In 12 Steps

    Learn how to get started in forex trading.

  6. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  7. Should You Add A Securities License To Your Qualifications?

    Clients love planners who sell securities, but a securities license takes a lot of work. Learn if the stress and study are worth it.

  8. The Best Way To Buy Silver

    Discover whether ETFs or physical bullion is the best way for investors to get exposure to silver.

  9. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  10. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Zomma

    An options greek used to measure the change in gamma in relation to changes in the volatility of the underlying asset.

  2. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  3. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  4. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  5. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  6. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=49e3cbded4ee06a4cc92855ec9836e57