As I understand it, recovery swaps and CDS are both used to provide hedging against the default risk of a loan.
What is the difference between them?
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CDS provides protection against default. So when a firm is unable to pay the coupon (and there are few more scenarios where firms default) CDS is triggered.
After default the liability holders have first claim on the firm's assets. If the assets are less than loan (say 60% of loan amount) then recovery can only be 60%.
if these are risky assets and there is possible uncertainty in the asset value from the time of default to recovery payout one can buy recovery swap or recovery default swap to provide a hedge against the such uncertainty of recovery in default.
Hope that makes sense