Derivatives Definitions

Credit Default Swap

A bilateral over-the-counter (OTC) contract in which the seller agrees to make a payment to the buyer in the event of a specified credit event in exchange for a fixed payment or series of fixed payments; the most common type of credit derivative; also called Credit Swap; s

Cash Forward Sale

See Forward Contract.

Vanilla

Refers to a simple form a derivative instrument, for example vanilla option – an option with no special or unusual features.

Forward Market

The over-the-counter market for forward contracts.

Forward Contract

A cash transaction common in many industries, including commodity merchandising, in which a commercial buyer and seller agree upon delivery of a specified quality and quantity of goods at a specified future date. Terms may be more “personalized” than is the ca

Total Return Swap

A type of credit derivative in which one counterparty receives the total return (interest payments and any capital gains or losses) from a specified reference asset and the other counterparty receives a specified fixed or floating cash flow that is not related to the credi

Swap

In general, the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities, or raising or lowering coupon rates, to maximize revenue or minimize financing costs. This may entail selling one securitie

Lookalike Swap

An over-the-counter swap that is cash settled based on the settlement price of a similar exchange-traded futures contract on a specified trading day.

Basis Swap

A swap whose cash settlement price is calculated based on the basis between a futures contract and the spot price of the underlying commodity or a closely related commodity on a specified date.

International Swaps and Derivatives Association

A New York-based group of major international swaps dealers, that publishes the Code of Standard Wording, Assumptions and Provisions for Swaps, or Swaps Code, for US dollar interest rate swaps as well as standard master interest rate, credit, and currency swap agreements and definitions for