Swaps and Credit derivatives also differ in legal function. A credit derivative describes various contracts designed to assume or distribute credit risk on loans or other financial instruments. Payment obligations of a seller is triggered by specified credit events affective defined assets or entities. In a swap, it was held in Hazell v Hammersmith and Fulham London Borough Council[1992] 2 AC 1, [739]-[740] by Woolf LJ that equity swaps were developed under ISDA's guidance and might be defined as These are differentiated from credit derivatives, which reference the credit risk of specified credit event; usually a bankruptcy, failure to make payment, or a breach of a condition such as a debt-to-equity ratio. Payment as a core concept in finance is crucial to the operation of derivatives.P Ali & de Vires Robbe Synthetic, Insurance, and Hedge Fund Securitisation (2004 OUP), 11 Credit derivatives which are "self-referenced", i.e. referencing the parties own credit worthiness have been considered by the courts as capable of involving fraud.Money Markets International Stockbrokers Ltd v London Stock Exchange Ltd [2001] Ch D 223
