An Equity Default Swap (EDS) is a derivative contract between two parties - a protection buyer and a protection seller - whereby the former has the right, in exchange for the regular payment of a premium (fixed payment), to receive from the latter a protection amount (floating payment) in case of a "trigger" event.
EDSs are therefore similar to credit default swaps (CDSs), with the only difference being the definition of a trigger event. In an EDS, a protection payment event is not triggered by a credit event as in a CDS, but when the stock price of the reference entity falls below a certain threshold, which is typically relatively low (for instance, 30% of the initial stock price).
The protection amount can be either a fixed amount based on the notional exposure of the reference entity (such as 50% of the notional) or any other function of the stock price.
Source: Moody's Investors Service