Credit Event
A Credit Event is the thing that will trigger a change in cashflows on a Credit Derivative.
There are typically 6 things that can trigger a Credit Event:
- Bankruptcy
- Obligation Acceleration
- Obligation Default
- Payment Default (Failure to Pay)
- Repudiation/Moratorium
- Restructuring
These all have very specific terminology as defined by ISDA
When someone believes that a Credit Event has occurred they will post a question to the Credit Derivatives Determinations Committee who will review the evidence and if a Credit Event has indeed occurred they will publish the results and also the exact date of this event which is called the Event Determination Date.
After a Credit Event has been confirmed this will then start in place a timeline leading to the Auction process to determine the final Recovery price(s).