Which Best Describes a Credit Default Swap

question 85

Multiple Choice

Which best describes a credit default swap?

• A) It is designed to reduce interest-rate risk.
• B) The issuer receives payments from the buyer in return for agreeing to make payments to the buyer if the security goes into default.
• C) Issuers are taking out insurance in case of default.
• D) It represents a way for the issuer to establish its creditworthiness.