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What risks does do the parties to a credit default swap give up and what risks do they take on?

April 26, 2017credit Default Parties swap

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What risks does do the parties to a credit default swap give up and what risks do they take on?

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The protection buyer gives up the risk of default by the reference entity, and takes on the risk of simultaneous default by both the protection seller and the reference credit. The protection seller takes on the default risk of the reference entity, similar to the risk of a direct loan to the reference entity.