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This practice note focuses on credit default swaps (CDS) (both
single-name and index) and provides a high-level overview of their
functioning, with a particular emphasis on corporate CDS. Although
the product may appear relatively simple at first sight, it is
governed by a complex set of rules. Investors should seek to fully
understand their terms before they trade the product in an effort
to avoid falling into a trap for the unwary.
Credit derivatives are financial contracts enabling market
participants to take, reduce, or transfer credit exposure on a