Credit derivatives historically carry several specific types of risk:
Documentation Risk:The risk arising from the complexity and potential ambiguity in the legal documentation of credit derivative contracts.
Definition of Credit Events:The risk associated with the precise definition of what constitutes a credit event, such as a default, which can be subject to interpretation and affect payouts.
Occurrence of Credit Events:The actual risk that a credit event will occur, triggering the derivative contract.
Enterprise risk is a broader category that typically includes all risks faced by an enterprise, not just those associated with credit derivatives.
References
Verified information on credit derivative risks from the document
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