luottotapahtumia

Luottotapahtumia, often translated as credit events, are significant occurrences that trigger a credit default swap (CDS) to pay out. These events are typically defined in the contract between the buyer and seller of the CDS. The purpose of a CDS is to protect the buyer against the risk of a borrower defaulting on their debt. When a credit event occurs, the seller of the CDS must compensate the buyer.

Commonly recognized credit events include bankruptcy, failure to pay, and restructuring. Bankruptcy signifies that the borrower is legally unable to repay its debts. Failure to pay occurs when the borrower misses a scheduled payment on its debt obligations. Restructuring, while sometimes debated in its inclusion, generally refers to changes in the terms of the debt that are detrimental to the lender, such as a reduction in principal or interest, or a significant extension of the maturity date.

The definition of what constitutes a credit event can vary between CDS contracts and is crucial for determining when the payout is activated. Parties involved in a CDS agreement carefully negotiate these definitions to ensure clarity and to mitigate potential disputes. The occurrence of a credit event is a fundamental mechanism that underlies the functioning of the credit derivatives market, providing a way to manage and transfer credit risk.