_______________________is a contract that transfer the default risk of a loan from the holder of the loan to a guarantor who receives a fee for accepting the risk.
A)A put option
B)A call option
C)A futures agreement
D)A credit derivative

Question

Quizplus · Accepted Answer

A credit derivative is a contract between two parties where one party (the guarantor) agrees to assume the credit risk of a loan or other financial asset owned by the other party (the holder) in exchange for payment of a fee. The most common type of credit derivative is a credit default swap (CDS), where the guarantor agrees to make payments to the holder if a specific credit event (usually a default) occurs.

_______________________Is a Contract That Transfer the Default Risk of a Loan