A credit default swap is essentially a:
A)put option on the firm's assets.
B)call option on the firm's assets.
C)put option on the firm's debt.
D)call option on the firm's debt.

Question

Quizplus · Accepted Answer

A credit default swap (CDS) is essentially a put option on the firm's assets because it provides protection against the default of a borrower, similar to how a put option provides the right to sell an asset at a specified price, protecting against a decline in value.

A Credit Default Swap Is Essentially A