Credit Default Swap
A CDS is a bilateral contract that pays the loss on a reference credit after a credit event — default insurance quoted as a spread.
Definition
Credit Default Swap refers to default insurance quoted as a spread. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Spreads and default paths reprice risk appetite faster than many equity narratives admit. When default insurance quoted as a spread shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what credit default swap is saying. If default insurance quoted as a spread moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Separate idiosyncratic names from index beta; watch issuance windows and rating migration. Prefer a short written null hypothesis for Credit Default Swap: what would falsify the current reading in the next window?