= Credit derivative
{wiki}
A <credit derivative> transfers exposure to deterioration of credit quality or a specified credit event of a reference borrower without necessarily transferring the underlying loan or bond. <Credit default swaps> transfer a defined loss exposure; <total return swaps> transfer a wider asset return. Funded structures such as <credit-linked notes> combine the exposure with an investor's initial principal. Documentation specifies the reference entity, obligations, credit events and settlement; a hedge can leave <counterparty credit risk> and mismatch with the original exposure.
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