Jurisdiction(s):
United Kingdom

Key definition

Derivative definition

What does Derivative mean? A derivative is a contract whose value or payoff is derived from an underlying asset, index or reference measure, for example a floating rate of interest, a currency exchange rate, an equity index or a commodity price. In practice, lawyers see derivatives as options, futures, forwards and swaps (including interest rate, currency and commodity derivatives), traded on exchanges or over the counter for hedging, risk management, speculation or arbitrage. The term is descriptive across legal contexts. For regulatory purposes, the UK perimeter classifies derivatives as specified investments under the Financial Services and Markets Act 2000 (Regulated Activities) Order...

Triggering and Settling Credit Derivatives under the 2014 ISDA: DC Determinations, EDD/NSEDD, Required Notices, and 2024–2025 Governance Reforms

Published by a LexisNexis Banking & Finance expert

Practice notes

How is a credit event determined?

Article 4 of the 2014 ISDA Credit Derivative Definitions (the 2014 Definitions) outlines the types of credit event that may arise. However, the mere occurrence of one of these events does not automatically trigger obligations under a credit derivative—certain procedural formalities must also be met. See Practice Notes: Credit Derivatives—credit events and Restructuring credit event.

Since 2009, the ISDA Credit Derivatives Determinations Committee (the DC) has decided the majority of credit events. Any eligible market participant may submit a credit event resolution request to ISDA regarding an affected reference entity under the 2014 Definitions. Accordingly, if you consider that a credit event has occurred for a reference entity named in a credit derivative to which a party is committed, that party can ask the DC to confirm publicly that a credit event has taken place.

When parties choose to apply the 2014 Definitions to their transactions, they agree—unless specifically carved out—to be bound by DC determinations. This helps to eliminate uncertainty about whether a credit event has occurred. DCs also determine whether succession events have occurred and the identity of any...

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Web page updated on 22/05/2026

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