What does Credit Default Swap - CDS mean?
A credit default swap (CDS) is similar to an insurance against credit risk. CDS transfers the credit exposure of the underlying fixed-income products such as bonds.
Futures Knowledge Explains Credit Default Swap - CDS
A CDS is a credit derivative. The buyer of a credit default swap gets credit risk protection for a fee. He makes periodic payments to the seller in exchange for a commitment to a payoff if a third party defaults. The risk of default gets transferred from the bondholder to the seller of the CDS. A CDS is also used by speculators without owning the underlying debt security. The buyers here speculate on the potential for default of repayment.