Credit Event - Meaning

An event linked to the deteriorating creditworthiness of an underlying Reference Entity in a credit derivative transaction. The occurrence of a Credit Event triggers full or partial termination of the contract and a compensatory payment from protection Seller to protection Buyer, through either Physical or Cash Settlement. The market standard Credit Events include Bankruptcy, Failure to Pay and Restructuring. However some contracts also include Obligation Acceleration, Obligation Default and Repudiation/Moratorium. The ISDA Determinations Committee now publishes its decisions as to whether a Credit Event has occurred on a particular Reference Entity on eligible credit derivative transactions.