Which of the Following Statements Is NOT Correct? Credit Swaps

question 37

Multiple Choice

Which of the following statements is NOT correct? Credit swaps bought by a bank

• A)are credit derivatives.
• B)are off- bank balance sheet activities.
• C)help the bank protect itself against interest rate risk.
• D)require a regular payment to the seller in order to have the seller paying the bank if the borrower on a loan defaults.

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Definitions:

Nash Equilibrium

A concept in game theory where each player's strategy is optimal given the strategies of all other players in the game, leading to a situation from which no player has an incentive to deviate.

Prisoner's Dilemma

A scenario in game theory where two individuals acting in their own self-interest do not produce the optimal outcome, showcasing the conflict between personal and collective rationality.

Payoff Matrix

A table that illustrates the outcomes (or payoffs) of different strategies or decisions made by players in a strategic or game-theoretic context.

Decision Nodes

Points in a decision process at which choices among alternative actions must be made.