Credit derivatives whose payoffs are triggered by the usual CDS credit events (e.g., bankruptcy, restructuring, failure to pay) and the deferral of preferred stock dividends (or interest, in the case of hybrids). Payments of preferred dividends in stock rather than cash also triggers a credit event.The reference obligation is defined as an obligation of the reference entity itself or a related preferred issuer (e.g Trust Preferreds). A preferred security is any security that represents a class of equity ownership which upon liquidation ranks prior to the claims of common stock holders. Reference obligations can be senior preferred or subordinated preferred.
