credit linked security

credit linked security
A type of credit derivative instrument. Credit linked notes are a securitized form of credit derivatives. The protection buyer issues notes. If a specified credit event occurs, the investor who buys the notes has to suffer either a delay in repayment or has to forego interest. (The specified credit event is pre-defined can be any one of a number of alternatives.)
Also known as credit linked security. American Banker Glossary
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A note whose cash flow depends upon a credit event or credit measure of a referenced entity or asset such as default, credit spread, or rating change. The manager would purchase such a note to hedge against possible down grades, or loan defaults that would guarantee payment into the portfolio of the manager even if moneys on referenced assets are reduced. Bloomberg Financial Dictionary

Financial and business terms. 2012.

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