In a One-Year Forward Contract on a CDS That Will

question 8

Multiple Choice

In a one-year forward contract on a CDS that will last five years,what usually happens if there is a default during the first year?

• A) There is a payoff to the forward protection buyer at the time of default
• B) There is a payoff to the forward protection buyer at the end of one year
• C) There is a payoff to the forward protection buyer at the end of six years
• D) The contract ceases to exist

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Definitions:

Intentionally

Done with purpose or deliberate intention; actions taken with a clear aim or objective in mind.

Negligent Conduct

Actions or failures to act that breach a duty of care owed to others, resulting in harm or injury.

Emergency

A sudden, unexpected situation requiring immediate action to prevent or mitigate harm.

Love v. Hardee's

A legal case referencing a specific dispute, often cited in discussions of legal responsibility and negligence in the context of corporate obligations to customers.