CDS

CDS

See:Credit Default Swap.

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Certificate of Deposit

A deposit at a bank or other financial institution that has a fixed return (usually via an interest rate) and a set maturity. The depositor does not have access to the funds in a certificate of deposit until maturity; in exchange, he/she is usually entitled to a higher interest rate. CDs are insured by the FDIC up to a certain amount and as such are a way to increase return for no extra risk. See also: Demand deposit, Real estate certificate of deposit, Negotiable certificate of deposit.

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Credit Default Swap (CDS)

What Does Credit Default Swap (CDS) Mean?

A swap designed to transfer the credit exposure of fixed-income products between parties.

Investopedia explains Credit Default Swap (CDS)

The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the creditworthiness of the product. When this is done, the risk of default is transferred from the holder of the fixed-income security to the seller of the swap. For example, the buyer of a credit swap still is entitled to the par value of the bond from the seller of the swap if the bond defaults in its coupon payments.

Related Terms:
• Bond
• Credit Derivative
• Fixed Income Security
• Interest Rate Swap
• Swap