Financial institutions may sell credit default swaps on mortgages if they expect defaults on many mortgages.

Name: Financial institutions may sell credit default swaps on mortgages if they expect defaults on many mortgages.
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Question

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Financial institutions sell credit default swaps to hedge against or speculate on the risk of default, not because they expect defaults. If they expect defaults, they might avoid selling swaps due to potential losses.

Financial Institutions May Sell Credit Default Swaps on Mortgages If