Template:M comp disc Credit Derivatives 4.4

The obvious comparison here is with “Cross Default” in the ISDA Master Agreement. Both are a “default” and not an “acceleration” trigger, both reference a threshold (for the ISDA, Threshold Amount; for the CDS, Default Requirement)

Differences:

Obligation: The CDS concept of “obligation” is adjustable: “Payment”, covering any payment obligation whether or not in the nature of borrowed money being a lot wider than the ISDA’s Specified Indebtedness, and “Reference Obligation Only” caputring only a specific instrument being a lot narrower.

Credit Support Provider: CDS does not independently pull in an Obligation guarantor’s general obligations other than those under the Reference Obligations themselves. For example, if a guarantor has, failed to pay its electricity bill but is not in default as guarantor under the Reference Entity’s Obligations — and, by the way, it is not impossible that its failure to pay its own power bill might be a default under an Obligation, but that would depend on the terms of the guarantee in question and is not inevitable — that would not ordinarily trigger a CDS.