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Credit derivatives terminology
By
Vinod Kothari
Bond insurance: An insurance contract that promises the bondholder a payment (may not be payment in full) in case the bond issuer defaults. The only difference between a bond guarantee and a bond insurance is that the payments under an insurance contract are by way of damages which might be defined by the insurance contract, while in a bond guarantee, the guarantor assumes the position of the original debtor. Compare with bond guarantee.
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