Reference Obligation

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Dictionary Says

Definition of 'Reference Obligation'

The specific underlying debt upon which a credit derivative is based. A reference obligation is issued by the reference entity. It does not represent all the forms of debt issued by the entity, but only a specific issue. Often, this obligation is the actual security that the credit derivative was created to hedge.

Investopedia Says

Investopedia explains 'Reference Obligation'

The reference obligation is the specific issue of a debt security upon which the two parties in the credit derivative transaction are betting against each other. If the reference entity defaults on this issue (or another specific, agreed-upon event occurs), the buyer receives a payout. If no triggering event occurs to the reference obligation, the seller of the credit derivative profits from the premium paid by the buyer.

Search results for

'Reference Obligation'

  • The Alphabet Soup Of Credit Derivative Indexes

    http://www.investopedia.com/articles/optioninvestor/07/credit-der-index.asp
    ... derivatives, the purchaser enters a contract that allows him or her to participate
    in the market movement of the underlying reference obligation or physical ...

  • Credit Default Swaps: What Happens In A Credit Event?

    http://www.investopedia.com/articles/bonds/09/what-happens-to-single-name-cds.asp
    ... A single-name CDS is a derivative in which the underlying instrument is a reference
    obligation, or a bond of a particular issuer or reference entity. ...

  • Credit Default Swaps: An Introduction

    http://www.investopedia.com/articles/optioninvestor/08/cds.asp
    ... For this reason, the bond involved in the transaction is called the "reference
    obligation." A contract can reference a single credit, or multiple credits. ...

  • Managing Interest Rate Risk

    http://www.investopedia.com/articles/optioninvestor/08/manage-interest-rate-risk.asp
    ... rate management options are option contracts whose underlying security is a debt
    obligation. ... from the cap seller (the short) when the reference interest rate ...

  • Derivatives 101

    http://www.investopedia.com/articles/optioninvestor/10/derivatives-101.asp
    ... A swaption gives the owner the right but not the obligation (like an option) to ... These
    contracts are usually written in reference to the spot or today's price. ...

  • How Bond Market Pricing Works

    http://www.investopedia.com/articles/bonds/07/pricing_conventions.asp
    ... This is because the interest rate (coupon) on a variable rate bond adjusts to current
    interest rates based on changes in the bond's reference rate. ...

  • Introduction To Counterparty Risk

    http://www.investopedia.com/articles/optioninvestor/11/understanding-counterparty-risk.asp
    ... to provide funds to counterparties in the face of deteriorating reference obligations,
    the ... the credit risk that Bank A will default on this obligation to Bank ...

  • 20 Investments: Conclusion | Investopedia

    http://www.investopedia.com/university/20_investments/21.asp
    ... directly through properties or mortgages. Treasuries are a debt obligation
    of a national government. Because they are backed by ...

  • Getting Started In Forex Options

    http://www.investopedia.com/articles/trading/04/101304.asp
    ... Options Traditional options allow the buyer the right (but not the obligation) to
    purchase ... 2 March 2010 Premium: 10 USD pips Cash (spot) reference: 1.3000 Say ...

  • Series 7 Study Guide - Customer Accounts - Required Disclosures ...

    http://www.investopedia.com/exam-guide/series-7/customer-accounts/required-disclosures.asp
    ... v. The Statement of Additional Information (SAI), incorporated by reference in the ...
    for sale, the source of bond proceeds (eg, a general obligation bond repays ...

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