Which of the following statements is (are) not true regarding a credit default swap (CDS)?
I. The purchaser of a CDS seeks credit protection.
II. Swap partners make payments based on a benchmark credit spread on the reference obligation.
III. Physical settlement provides the CDS buyer the par value of the reference obligation.
IV. A CDS has the same payoffs as a credit default put with installment payments.
A. II only.
B. I and III.
C. III only.
D. II and IV.
Answer:A
The CDS buyer makes fixed payments to the seller of the CDS for the life of the swap or until a credit event occurs.

 
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