Credit Default Swaps
Credit risks associated with default on loans can be transferred to third parties through derivative contracts. These agreements act as insurance as they allow investors to swap or offset credit risk with other investors. Therefore, CDS has two main uses, first is acting as a hedge or insurance against default and secondly, as a speculative instrument about the credit quality of a borrower aka a reference entity. These swaps are traded over the counter in traditional financial markets among traders in lieu of a positive or negative credit event and subsequent profit. EasyFi intends to automate whole process through smart contracts and provide efficient market for credit default swaps.