Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume that you are lending money to company X. A credit default swap (CDS) consists of an agreement by a third party to pay the

Assume that you are lending money to company X. A credit default swap (CDS) consists of an agreement by a third party to pay the lost principal and interest of a loan to you (the CDS buyer) if a borrower defaults on a loan. Which of the following is false?

A. A Swap completely solves the problem that company X might default

B. A Swap solves the default problem from Company X on the condition that the third party (CDS provider) will not default.

C. When financial crisis happens, the CDS seller may have to pay recovery to many CDS buyers, and then the CDS seller could default.

D. B and C are part of the reasons for 2008 Global financial crisis.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managing Finance A Socially Responsible Approach

Authors: D. Crowther

1st Edition

0750661011, 978-0750661010

More Books

Students also viewed these Finance questions

Question

Define Heideggers terms throwness, Mitwelt, and Umwelt.

Answered: 1 week ago

Question

What does this key public know about this issue?

Answered: 1 week ago

Question

What is the nature and type of each key public?

Answered: 1 week ago

Question

What does this public need on this issue?

Answered: 1 week ago