Understanding Credit Default Swaps: Mechanisms, Risks, and Market Impact

Introduction

This report examines credit default swaps (CDS), which are financial derivatives used to transfer the credit risk of fixed income products between parties. The purpose of this report is to elucidate the mechanisms underlying CDS, explore the associated risks, and assess their impact on financial markets. As a pivotal tool in modern finance, understanding CDS is crucial for comprehending the broader implications of risk management and market stabi