In Core Reading Unit 16, Section 7.3.2: The 4th sentence reads, “However, if a credit event occurs during this term, the swap is terminated and the buyer of protection delivers compensation for the loss on the reference credit.” Is this incorrect or am I misunderstanding? I thought that the buyer of protection receives compensation for the loss... It’s the tail end of the course, so maybe my brain has given up!
You're right. It could also be that buyer of protection delivers the asset and receives compensation, in cash the deal is not cash settled.
