Use the following statements to answer this question:
I.Credit default swaps (CDS)are insurance on the default of issuers of the debt.
II.The CDS market is heavily regulated to limit excessive exposure to risk.
A)I is correct, II is incorrect
B)I and II are correct
C)I and II are incorrect
D)I is incorrect, and II is correct

Question

Quizplus · Accepted Answer

Statement I is correct as credit default swaps are a form of insurance that protect investors from the default of the underlying debt issuer. However, statement II is incorrect because the CDS market is not heavily regulated, and its lack of regulation was a contributing factor to the 2008 financial crisis.

Use the Following Statements to Answer This Question