Buyers of credit default swaps are most likely going to receive a payment from the seller of credit default swaps when the economy:

Question

Quizplus · Accepted Answer

Buyers of credit default swaps purchase protection against default risk on a particular underlying asset, such as a bond or a loan. In times of weak economic conditions, such as a recession, the default risk of the underlying asset increases, which makes it more likely that the buyer of the credit default swap will receive a payment from the seller. Therefore, the answer is A, when the economy is very weak.

Buyers of Credit Default Swaps Are Most Likely Going to Receive