Contingent Claims

Contingent claims refer to financial rights that depend on certain future events occurring. In the context of a creditor's rights, this means that a creditor may have a claim to repayment only if specific conditions are met, such as the borrower achieving certain financial milestones or the occurrence of an event like bankruptcy. These claims are uncertain and can change based on circumstances, making them different from direct claims, which are guaranteed. Understanding contingent claims is important for assessing the risks and potential recovery that creditors face when lending money.