Single-name credit default swap

The simplest - and most common - type of credit default swap is one where there is just one reference entity. This is called a single-name credit default swap. The reference entity can be any borrower, but is most often one of a few hundred widely traded companies (corporate or financials) or a handful of governments (soverigns). Credit default swaps can be used to transfer types of credit risk other than borrowings (such as trade debt), but these contracts are not standard and are rarely seen in practice.

A single name credit default swap acts like an insurance contract against the default of a reference entity. The buyer of protection (known in the contract as the 'fixed rate payer') makes periodic premium payments to the seller of protection (the 'floating rate payer').

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