This is a joint proposal on the integration of Credit Derivative Products into the FpML Standard.
This document was produced by the following:
This document proposes how to include Credit Derivatives into the FpML Standard. It uses the FpML 3.0 Working Draft as a base line. It details the additions required to that standard and documents only those additions. The purpose of the document is to give a starting point for an FpML Working Group to produce a version of FpML including Credit Derivative Products.
The scope of this document has been limited to a credit default swap.
In this proposal a Credit Default Swap has been added into the FpML product set. The following design decisions were made:
A credit default swap represents a financial contract in which a counterparty (a protection buyer) pays a fee, usually captured in basis points on a notional amount, in return for a default payment by the protection seller. The latter is paid only if a credit event, involving a third party reference, occurs. A credit event may be represented by a bankruptcy, a default on payment or a restructuring event, to name just a few.