A single-name CDS is a credit default swap referencing one borrower or issuer rather than an index or basket.
Single-Name Credit Default Swaps (CDS) are financial derivative contracts that serve as a form of insurance against the default of a specific entity, typically a corporation or sovereign state. A single-name CDS involves a buyer who makes periodic payments to a seller in exchange for compensation if the reference entity defaults on its obligations.
Single-Name CDS can be categorized based on:
A single-name CDS operates as follows:
Parties Involved:
Premium Payments: Made by the protection buyer, generally quarterly.
Credit Event: Defined circumstances under which a payout occurs, such as default or restructuring.
Settlement:
CDS pricing involves complex models. The following is a simplified version:
For finance readers, Single-Name CDS is useful when reviewing contract payoff, notional exposure, collateral, settlement, hedge objective, and counterparty risk. Single-Name CDS connects the definition to measurement, timing, risk, documentation, and comparability decisions instead of leaving the concept as isolated vocabulary.
If Single-Name CDS appears in an analysis file, compare the stated amount, rate, right, or obligation with the supporting contract, account, market data, or policy. Then identify how Single-Name CDS changes who benefits, who bears the risk, and which financial statement, valuation, or cash-flow line changes.
Ask whether Single-Name CDS changes amount, timing, probability, liquidity, rights, reporting, or control evidence. If it does not, keep Single-Name CDS as context; if it does, tie it to the recommendation, valuation input, control step, disclosure, or risk decision.
Interpret Single-Name CDS by mapping it to price formation, contract rights, trading constraints, risk transfer, and settlement mechanics.
In finance, Single-Name CDS matters when it affects valuation, execution, exposure measurement, margin, liquidity, or the reliability of a hedge.
Do not confuse Single-Name CDS with a standalone trading recommendation. It is a market concept that still depends on price, timing, liquidity, and risk limits.
You will see Single-Name CDS in trade tickets, exchange rules, broker notes, risk reports, option chains, fixed-income screens, and market commentary.
Treat Single-Name CDS as important when it changes how a position is priced, traded, hedged, funded, or settled.
Use Single-Name CDS when a derivatives or instrument decision depends on payoff shape, exercise rights, maturity, settlement, margin, collateral, counterparty exposure, or hedge effectiveness. The practical task for Single-Name CDS is to convert contract language into cash-flow and risk behavior.
Review Single-Name CDS through three questions: what event triggers payment or delivery, who has optionality or obligation, and how value changes when the underlying price, rate, spread, volatility, or time changes. If Single-Name CDS changes exposure, hedge accounting, liquidity, close-out rights, or stress losses, Single-Name CDS belongs in the risk model and trade documentation review rather than only in a glossary.
For Single-Name CDS, the decision impact is whether the contract changes payoff, hedge behavior, margin, collateral, valuation, settlement, or close-out exposure. If no trigger, input, or counterparty right changes, Single-Name CDS should not be treated as a separate risk driver.
The analysis boundary for Single-Name CDS is crossed when payoff, optionality, valuation input, margin, collateral, settlement, hedge behavior, and close-out rights do not change. Then it is contract vocabulary rather than a separate risk exposure.
The practical signal for Single-Name CDS is a changed contract exposure: payoff, coupon, maturity, settlement, collateral, margin, exercise right, close-out treatment, or valuation input. When that signal appears, map Single-Name CDS to the instrument clause and pricing effect.
The evidence link for Single-Name CDS is the term sheet, indenture, prospectus, confirmation, clearing record, collateral schedule, pricing model, or payoff table. Without that link, Single-Name CDS should not support a cash-flow, valuation, margin, or rights conclusion.
The decision marker for Single-Name CDS is the moment contract economics change: payoff, coupon, maturity, collateral, exercise, conversion, settlement, margin, close-out rights, or valuation input. If those economics are unchanged, do not treat it as a new exposure.
The source check for Single-Name CDS is the instrument document: prospectus, indenture, confirmation, term sheet, clearing record, collateral schedule, pricing model, or payoff table. Prefer contract evidence over instrument shorthand when Single-Name CDS affects rights, cash flow, or valuation.
Review evidence for Single-Name CDS should make the financial-instrument evidence traceable, not just definitional. For Single-Name CDS, tie the evidence to the contract, security master record, payoff terms, pricing source, and settlement instructions and explain why that evidence is reliable enough for the finance decision.
Before relying on Single-Name CDS, document the decision context: the trade date, valuation date, maturity, reset date, and settlement cycle. Keep the Single-Name CDS evidence trail visible: independent price verification, counterparty record, collateral status, and accounting classification. In Derivatives work, Single-Name CDS matters when it changes cash flows, fair value, risk exposure, hedge treatment, or balance-sheet presentation.
The practical risk for Single-Name CDS is that instrument terms are unreliable unless the legal terms, payoff profile, valuation source, and settlement facts are aligned. If those facts are unavailable, keep Single-Name CDS in the explanatory layer instead of treating it as decision-grade evidence.
Use Single-Name CDS as a decision workflow, not a static glossary label: define the finance meaning, verify the evidence, and identify which conclusion changes. Start by linking Single-Name CDS to contract payoff, pricing source, settlement term, counterparty exposure, and accounting classification. Only after those checks should Single-Name CDS influence an instrument analysis.
For Single-Name CDS, confirm the source record, the date or jurisdiction that could change the answer, and the finance decision affected if the evidence were wrong. If those checks are incomplete, keep Single-Name CDS as explanatory context rather than a decisive input.