A Credit Default Swap Means

question 73

Multiple Choice

A credit default swap means:

• A) initial payment of a periodic premium by the buyer of a credit default swap.
• B) the buyer of a credit default swap obtains protection against credit risk exposures associated with specified debt issues.
• C) if the specified debt issuer defaults then the credit default swap protection seller assumes the risk.
• D) all of the given answers are correct.

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Definitions:

Fire Insurance Policy

A contract that provides coverage against losses or damages caused by fire to property.

Premium

The consideration paid by the insured to the insurer for insurance protection.

Water Damage

Water damage refers to the destruction or harm caused to property by water intrusion, which can result from various sources like floods, leaks, or condensation.

Decreasing Term Insurance

A type of term life insurance where the death benefit decreases over time, often used to cover specific financial obligations that reduce over time, like a mortgage.