What is second-to-default credit derivative in SAP FS-BA-PM-CR - Credit Risk?

SAP Term: second-to-default credit derivative

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: A second-to-default credit derivative is a protection that arises when the bank obtains a credit protection for a basket of reference names and the second default of one of these names triggers the credit protection. This credit event then also terminates the contract.

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• Key Concepts: 
  A second-to-default credit derivative is a type of credit derivative that provides protection against the default of the second-most likely issuer of a debt instrument. This type of derivative is used to hedge against the risk of default of the second-most likely issuer, which may be more likely to default than the most likely issuer. 
  
  How to use it: 
  The second-to-default credit derivative can be used to hedge against the risk of default of the second-most likely issuer. This type of derivative can be used in conjunction with other derivatives, such as first-to-default and third-to-default derivatives, to provide a comprehensive hedge against multiple issuers. 
  
  Tips & Tricks: 
  When using a second-to-default credit derivative, it is important to consider the potential risks associated with the issuer. It is also important to consider the potential costs associated with using this type of derivative, as well as any other derivatives that may be used in conjunction with it. 
  
  Related Information: 
  The FS-BA-PM-CR Credit Risk Management component of SAP provides tools and features for managing credit risk. This includes features for managing derivatives, such as first-to-default and second-to-default derivatives, as well as features for managing other types of credit risk.