Credit events are a crucial aspect of a credit default swap, or CDS. For example, holders of Fannie Mae or Freddie Mac bonds may have bought a CDS- in effect a type of insurance contract- which specifies the circumstances under which the CDS seller has either to pay them cash compensation, or perhaps buy their bonds for a pre-agreed price. Such circumstances are known as 'credit events' and may include a firm defaulting, or having its bonds downgraded. In addition, 'force majeure' clauses specify unusual conditions- such as a war, act of God or nationalisation- under which existing contracts may have to be cancelled and unwound so both parties can be returned to their pre-contractual positions.
Watch Tim Bennett's video tutorial: Credit default swaps - should investors be worried?
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SIPP holders to get cash warnings and be offered default fundsNews Providers will be required to offer investors a default fund and must warn customers of the inflationary risk of cash savings the regulator has said. What the new rules mean for your retirement pot?
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Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?
News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
