A CDS is a swap between two counterparties, the buyer and the seller of credit protection referencing a debt issuer (either a company or a country). In exchange for a stream of payments, the buyer of protection will be compensated in case theissuer defaults. The CDS is like an insurance contract against the default of a debt issuer. The CDS default settlement is triggered by the occurrence of a credit event that requires the seller of protection to pay the buyer a compensation for the issuer’s unrecovered amount.