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Loan-Only CDSs

In: Credit Default Swaps

Author

Listed:
  • Christopher L. Culp

    (Johns Hopkins University)

  • Andria van der Merwe

    (Johns Hopkins University)

  • Bettina J. Stärkle

    (Compass Lexecon)

Abstract

We discuss the underlying market for broadly syndicated leveraged loans that characterize the deliverable loans on which most loan-only CDSs (“LCDSs”) are based. We then review the significant distinctions between single-name CDSs (typically based on bonds issued by reference entities) and LCDSs with loan-specific deliverable obligations. Such distinctions include reference entity credit events that trigger LCDSs, the timing of coupon payments on LCDSs, the specific obligations underlying LCDSs that are deliverable into LCDS-specific auctions or physical settlements, and the embedded cancellation options in LCDSs corresponding to prepayments on underlying broadly syndicated term loans.

Suggested Citation

  • Christopher L. Culp & Andria van der Merwe & Bettina J. Stärkle, 2018. "Loan-Only CDSs," Palgrave Studies in Risk and Insurance, in: Credit Default Swaps, chapter 0, pages 67-83, Palgrave Macmillan.
    • Handle: RePEc:pal:psircp:978-3-319-93076-3_3
    DOI: 10.1007/978-3-319-93076-3_3
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